Hydrophobic magnesium hydroxide (Mg(OH)2) nanoparticles are prepared by surface modification method with oleic acid (OA) as surface modifier. The influence of synthesis parameters on the hydrophobicity of magnesium hydroxide nanoparticles were studied, such as the amount of OA, modification time and reaction temperature. The results show that the product obtained with this method possesses excellent hydrophobic property such as a high water contact angle of 106° and a well dispersion. The Mg(OH)2 nanoparticles exhibit a lamella morphology and staggered pattern. The scanning electron microscopy (SEM) results prove that the hydrophobic property is enhanced dramaticlly due to this morphology. The Fourier transform infrared spectroscopy (FTIR) analysis and Thermogravimetric (TGA) analysis prove the OA molecules are bonded onto the surface of Mg(OH)2 nanoparticles with a stable chemical bond. The crystal habit of the magnesium hydroxide nanoparticles was characterized by X-ray diffraction (XRD).