An ab initio theoretical study of the optical absorption spectrum of Ni2+-doped MgO has been conducted by means of calculations in a MgO-embedded (NiO6)(10-) cluster. The calculations include long- and short-range embedding effects of electrostatic and quantum nature brought about by the MgO crystalline lattice, as well as electron correlation and spin-orbit effects within the (NiO6)(10-) cluster. The spin-orbit calculations have been performed using the spin-orbit-CI WB-AIMP method [Chem. Phys. Lett. 147, 597 (1988); J. Chem. Phys. 102, 8078 (1995)] which has been recently proposed and is applied here for the first time to the field of impurities in crystals. The WB-AIMP method is extended in order to handle correlation effects which, being necessary to produce accurate energy differences between spin-free states, are not needed for the proper calculation of spin-orbit couplings. The extension of the WB-AIMP method, which is also aimed at keeping the size of the spin-orbit-CI within reasonable limits, is based on the use of spin-free-state shifting operators. It is shown that the unreasonable spin-orbit splittings obtained for MgO:Ni2+ in spin-orbit-CI calculations correlating only 8 electrons become correct when the proposed extension is applied, so that the same CI space is used but energy corrections due to correlating up to 26 electrons are included. The results of the Ligand field spectrum of MgO:Ni2+ show good overall agreement with the experimental measurements and a reassignment of the observed E(g)(b(3)T(1g)) excited state is proposed and discussed.