Two kinds of magnesium slag from different places were added in clinker respectively to manufacture portland cement, and the essential properties of cement, such as water requirement of normal consistency, setting time and strength, were studied. The influence of magnesium slag on the drying shrinkage of portland cement was investigated. Meanwhile, effects of magnesium slag in portland cement were analyzed on the basis of XRD, DSC/TG and SEM microscopic experiments. The results show: magnesium slag plays roles in water-reducing and set-retarding as a composite material of cement; when the contents of magnesium slag range from 10%～30% (weight ratio) and 35%～40% (weight ratio), cement samples reach Composite Portland Cement 42.5R and 32.5R standard, separately; the drying shrinkage of mortar can be restrained as the contents of magnesium slag range from 30%～40%; and the structure of cement pastes is more compacted as magnesium slag reacts with the hydrations of clinker.