In this paper, a method of modifying epoxy resin with MDI and hydroxy silicone oil was studied. Firstly, MDI-hydroxy silicone oil prepolymer was synthesized using the bridging effect of MDI, and the optimal factors to prepare prepolymer were determined by IR testing and stability analysis; Then, the epoxy resin was modified by the prepolymer through continuous dropping process. The effect of catalyst’s amount, reaction time and reactant ratio on the modified resin was investigated in detail through IR, GPC testing and stability analysis to optimize modification factors. The results have shown that appropriate ratio of resin and prepolymer is 4:1 (mass ratio), appropriate amount of organotin catalyst is 0.5% (accounting on the total system), and reaction time is 4h; Further, Mg-rich coating was prepared using the modified resin, and protective performance for aluminum alloy was studied through basic performance testing of coating, salt spray testing and aging testing. The results have shown that Modified epoxy resin-Mg rich coting has high adhesion, flexibility and impact resistance, especially, the salt spray resistance and aging resistance were excellent.