There is an increasing interest in the development of Mg alloys, both for industrial and biomedical applications, due to their favorable characteristics such as being lightweight and robust. However, the inadequate corrosion resistance and lack of antibacterial properties pose significant challenges in the industrial and biomedical applications, necessitating the implementation of advanced coating engineering techniques. Plasma electrolytic oxidation (PEO) has emerged as a preferred coating technique because of its distinctive properties and successful surface modification results. However, there is a continuous need for further enhancements to optimize the performance and functionalities of protective surface treatments. The integration of layered double hydroxide (LDH) into PEO coatings on Mg alloys presents a promising approach to bolstering protective properties. This thorough review delves into the latest developments in integrating LDH into PEO coatings for corrosion-related purposes. It particularly emphasizes the significant improvements in corrosion resistance, antibacterial effectiveness, and photocatalytic performance resulting from the incorporation of LDH into PEO coatings. The two key mechanisms that enhance the corrosion resistance of PEO coatings containing LDH are the anion exchangeability of the LDH structure and the pore-sealing effect. Moreover, the antibacterial activity of PEO coatings with LDH stemmed from the release of antibacterial agents stored within the LDH structure, alterations in pH levels, and the photothermal conversion property. Furthermore, by incorporating LDH into PEO coatings, new opportunities emerge for tackling environmental issues through boosted photocatalytic properties, especially in the realm of pollutant degradation.