Taking into the consideration of that forsterite has high melting point, good crystalline stability, no hydration and good compatibility with magnesia, while for natural occurred olive ore, the impurity level is high, the present work synthesized high purity forsterite with a mass ratio 60:40 of MgO over SiO2, using magnesite, caustic magnesia and natural silica as starting materials. The synthesized forsterite as aggregates was added in magnesia based castable, using dead burned magnesia as aggregates and MgO-SiO2-H2O binding, to replace magnesia aggregates up to 60% at an interval of 15%. The effect of the forsterite addition on properties of the MgO based castables was investigated. Microstructure analysis of related samples was carried out by means of SEM. Hot strength at 1400 degrees C and thermal shock resistance can be improved by appropriate addition of the forsterite. Bulk density of the castable can be reduced with increased addition of the forsterite. High alumina bauxite was also incorporated to make use of its reaction with magnesia to form spinel, accompanying volumetric expansion, to compensate the shrinkage at high temperature.