CaO is considered as possible replacement for cover gases such as SF6 during melting and casting of Mg alloys. Such CaO additions to molten Mg increase the ignition resistance by forming a protective oxide layer. The actual reactions between liquid Mg and CaO are not well understood, an approach based on simple chemical reaction equations cannot capture the "CaO dissolution" process. This work presents the development of a consistent thermodynamic description of the ternary Mg-Ca-O alloy system. To that end a revision of the thermodynamic data of key oxides, CaO and MgO, has been performed based on original experimental work so far not considered in thermodynamic databases or tabulations. The formation of a liquid Mg-Ca-[O] alloy during the reaction is predicted from the thermodynamic calculations at melting temperatures; solidification simulations are also performed. These predictions from thermodynamic simulations are validated by experimental data using in-situ synchrotron radiation diffraction.