We report exciton and phonon properties of ZnO:Mg nanorods of different Mg doping concentration. X-ray diffraction studies (XRD) confirm the growth of wurtzite phase ZnO nanostructures. XRD reveals doping-induced shift in peaks and formation of secondary phase related to Mg. Optical properties of the prepared nanorods are investigated by using UV-Visible absorption and photoluminescence spectroscopic techniques. Optical absorption studies show strong free excitonic absorption of ZnO and extra absorption bands related to the defect centers of the secondary phase (MgO) formed after Mg doping. Photoluminescence studies show sharp band in UV region and defects-related broad band emission in the visible range. Gaussian-fitted photoluminescence spectra show that the emission is composed of free exciton recombination and its longitudinal optical (LO) phonon replica. In addition, Mg-related local vibrational mode observed in Raman and FTIR spectra after Mg doping, indicates the incorporation of Mg into the lattice positions of wurtzite ZnO.