The bioactive and biocompatible properties of hydroxyapatite (HA) promote the osseointegration process. To enhance other bio-functions of HA such as improving the antibacterial property of the implant, increasing the rate of cell proliferation, or improving tissue generation capability, HA is substituted with many elements such as Zn, Cl, Ba, Fe, Cu, Ag, Sr, F, Na, etc. This study reports development of Magnesium substituted HA (Mg-HA) coatings on Ti6Al4V substrates using the dip coating technique. To improve the adhesion and stability of the coating, an intermediate layer of shellac was applied between the coating and Ti6Al4V substrate. The dip coating process parameters were optimized using the Taguchi technique and it was found that dipping time of 35 s and 13% w/w of shellac concentration provided the maximum bonding strength of 12.5 MPa. The biocompatibility, dissolution, and corrosion study of the developed coating using the optimal parameters obtained were carried out in this study. An improvement in cell growth and cell proliferation was observed in the extract medium prepared from coated substrates. Release of Ca, P and Mg ions from the surface of the coated substrate into the simulated body fluid (SBF) was found to be almost constant which shows the stability of the thin film coating formed. The Mg-HA coated substrate also exhibited better corrosion resistance than the uncoated substrate.