Layered P2-type Na0.67Fe0.5Mn0.5O2 with economic and environmental friendly metal elements is considered to be a candidate cathode for sodium-ion batteries. However, the poor rate performance and cycling stability of the cathode materials are still the pivotal constraints to the commercial development. To address these concerns, a series of different stoichiometric of Mg2+ substitution samples Na0.67(Fe0.5Mn0.5)1-xMgxO2(x = 0.05, 0.1, 0.15, 0.2, 0.25) are synthesised by solid-state reaction. The results indicate that the introduction of Mg2+ in P2Na0.67Fe0.5Mn0.5O2 cause the transformation of P2 phase to O3 phase with a tremendous influence to the cycling performance. The sample shows P2 phase at x = 0.05. The P2 and O3 phases coexist in the compound while x = 0.1, 0.15, and 0.2. The sample exhibits O3 phase at x = 0.25. The novel composition of P2/O3 biphase Na0.67Fe0.425Mn0.425Mg0.15O2 delivers exceptional rate and cycling performance. Owing to the synergetic effect of P2 and O3 phases, the cathode exhibits excellent capacity retention of 95.7% of its initial capacity after 50 cycles at 1C, and 87.7% after 100 cycles. Therefore, Na0.67Fe0.425Mn0.425Mg0.15O2 with a novel P2/O3 biphase structures may be a promising cathode material for next generation high-performance sodium-ion batteries in the near future.