A three-dimensional global potential energy surface for the ground electronic state of MgH2 is constructed from more than 3000 ab initio points calculated using the internally contracted multireference configuration interaction method with the Davidson correction at the complete basis set limit. Low-lying vibrational energy levels of MgH2 and MgD2 are calculated using the Lanczos algorithm, and found to be in good agreement with known experimental band origins. The majority of the vibrational energy levels up to 8000 cm(-1) are assigned with normal mode quantum numbers. However, our results indicate a gradual transition from a normal mode regime for the stretching vibrations at low energies to a local mode regime near 7400 cm(-1), as evidenced by a decreasing energy gap between the (n(1),0,0) and (n(1)-1,0,1) vibrational states and bifurcation of the corresponding wave functions. (C) 2004 American Institute of Physics.