Surface modification is very important to industrial application of the magnesium hydroxide (MDH) powder, which is used as a kind of environment-friendly flame-retardant. In this paper, a kind of MDH powder surface-modified with silicane coupling agent and stearic acid is synthesized, and its potential usage in the flame-retardant treatment of flexible PVC is studied. The influence of the surface treatment to the dispersion of the powder in PVC, the flame-retardant and other physical properties of the MDH flame-retardant treated flexible PVC are discussed in detail. The surface modification mechanism of MDH is studied by the FTIR analysis, and then the surface modification model is established. Results show that molecules between the surface of the particle and these two modifiers form stable chemical bonds, and this kind of surface modification can improve the MDH’s dispersion and the compatibility of the flexible PVC. When the flame-retardant flexible PVC is produced according to the mass composition of PVC/DOP/MDH=100:50:80 and a few other additives, its oxygen index is 31.5, the elongation at break is 240%, the tensile strength is 13.0MPa, the hypothermia tendering is +30/-0, the volume resistivity at 20°C is 3.2×1011Ω•m. These index are just correspondent with requires of the halogen-free fire-retardant flexible PVC.