Highly defective magnesium oxide nanosheets were synthesized using a colloidal synthesis in which magnesium ethoxide was thermally decomposed in high-boiling-point weakly coordinating solvents. The nanosheets were assembled of small nanocrystal building blocks by oriented attachment. This assembly could be inhibited by using a strongly coordinating surfactant, such as oleic acid. The 2–3 nm spaced extended defects formed at the grain boundaries make up a material with a record defect density which causes an increased conductivity and dielectric constant, strong luminescence and paramagnetism. The point defect type prevailing at those interfaces is apparently charged oxygen vacancies. In situTEM annealing experiments showed that the extended defects begin to anneal out at temperatures as low as 300 °C, but a high density of point defects apparently survives even at 750 °C.