Magnesium-substituted lithium ferrite powders (Li 1−x Mg 2x Fe 5−x O 8 where x = 0.0–0.8) were prepared by sol–gel auto-combustion method. XRD profiles revealed that all compositions were single cubic ferrite structure for the precursors annealed at 800 °C for 2 h. The crystallite size was found to decrease whereas the lattice parameter was increased with increasing Mg 2+ ion content. The microstructure of the formed powders was Mg concentration dependent. Increasing the Mg 2+ ion ratio was found to inhibit the grain growth of the formed ferrite. The AC electrical conductivity of Mg 2+ ion substituted lithium ferrite samples was raised with increasing the concentration of Mg 2+ ions as the result of increasing the hopping of electrons between Fe 2+ and Fe 3+ ions. Meanwhile, dielectric constant (ε′) was diminished with increasing the frequency of external electric field as well as increasing the temperature and concentration of Mg 2+ ions. Alongside, the formed crystalline magnesium substituted lithium ferrite had good magnetic properties. High saturation magnetization (78.7 emu/g) was attained by the formed ferrite sample at Mg 2+ molar ratio of 0.4 annealed at 800 °C for 2 h.