We present a detailed investigation of bulk properties of MgO and lattice relaxations around divalent impurities in MgO by means of the full-potential Korringa-Kohn-Rostoker Green's function method. The local-density approximation and the perturbative generalized gradient corrections are used to calculate the lattice constant and bulk modulus of MgO. We obtain a very good description of the ground properties of MgO. Lattice relaxations around divalent impurities in Mgo are determined using an ionic version of the Hellmann-Feynman theorem.