The MgO protective layer plays an important role in plasma display panels (PDPs). Our previous work demonstrated that the properties of MgO thin film could be improved, which were deposited by ion beam assisted deposition (IBAD). However arc discharge always occurs during the IBAD process. To avoid this problem, oxygen neutral beam assisted deposition (NBAD) is used to deposit MgO thin films in this paper. The energy of the oxygen neutral beam was used as the parameter to control the deposition. The experimental results showed that the oxygen neutral beam energy was effective in determining in F/$F^+$ centers, crystal orientation, surface morphology of the MgO thin film, and the discharge characteristics of AC PDP. The lowest firing voltage $(V_f)$ and the highest secondary electron emission coefficient $(gamma)$ were obtained when the neutral beam energy was 300 eV.