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The influence of the core-hole effect on optical properties of magnesium oxide (MgO) is established through experimental determination of optical constants and first-principles density functional theory studies. Optical constants (δ and β) of MgO thin film are measured in the spectral region 40–300 eV using reflectance spectroscopy techniques at the Indus-1 synchrotron radiation source. The obtained optical constants show strong core exciton features near the Mg L-edge region, causing significant mismatch with Henke's tabulated values. On comparing the experimentally obtained optical constants with Henke's tabulated values, an edge shift of ∼3.0 eV is also observed. Distinct evidence of effects of core exciton on optical constants (δ and β) in the near Mg L-edge absorption spectra are confirmed through first-principles simulations.