Thin films of Mg-free and Mg-doped (3, 10 and 20 mol%) ZnO thin films have been deposited on Si (100) substrates by RF magnetron sputtering for gas-sensing application. Preferential orientation along (002) plane with hexagonal wurtzite structure has been observed in X-ray diffraction analysis. The conductivity, resistivity, and mobility of the deposited films have been measured by Hall effect measurement. The bandgap of the films has been calculated from the UV-Vis-NIR spectroscopy. It has been found that the bandgap was increased from 3.35 to 3.91 eV with Mg content in ZnO due to the radiative recombination of excitons. The change in morphology of the grown films has been investigated by scanning electron microscope. Gas-sensing measurements have been conducted for fabricated films. The sensor response, selectivity, and stability measurement were done for the fabricated films. Though better response was found towards ethanol, methanol, and ammonia for MZ2 (Mg at 10 mol%) film and maximum gas response was observed towards ammonia. The selectivity measurement reveals maximum sensitivity about 42% for ammonia. The low response time of 123 s and recovery time of 152 s towards ammonia were observed for MZ2 (Mg at 10 mol%). Stability of the Mg-doped ZnO thin film confirmed by the continuous sensing measurements for 4 months.