The mechanism for phosphate cement hydraulic reaction is determined. The microscopic process is described by means of scanning electronic microscope, X-ray diffraction analysis,infrared spectrophotometry and differential heat analysis. The results show the three main phases are present, i.e. hydromagnesium phosphates, Mg (OH)2 and MgO phase. The type, structure, and amount of every phase play an important role in phosphate cement properties. Hydromagnesium phosphate phase structure has a close relation to phosphate cement setting and hardening. The development of strength has much to do with the formed crystalline directing.