Ni-WC-MgO compound coatings were made by way of Vacuum Fusion Sintering (VFS). Effects of MgO addition level on the microstructures of coating surface and longitudinal section, element diffusion in fusion sintering area and wear resistance were analyzed through scanning electron microscope (SEM) and energy dispersive spectrometer (EDS). The results showed as the following: MgO addition made coating and matrix combined closely; there existed obvious transition region. When the addition level of MgO was 0.5%, the coating had the fewest defects and best combination. Ni, Cr, W, C and other elements in the coating diffused to the direction of the base metal while Fe in the base metal diffused to the coating, during which the diffusion of Fe and Ni was most obvious at the junction. Therefore, when the addition level of MgO was 0.5%, the surface microstructure of the coating was the densest and finest, and the wear resistance of the coating was the best.