To study the effect of environment oxygen content (oxygen volume fraction) at different altitudes on the combustion characteristics of aluminum-magnesium fuel-rich propellant, the laser radiation ignition was used. The ignition and combustion process of the propellant was recorded by a high-speed camera, and the surface temperature and flame temperature of the propellant were measured by an infrared thermometer. The effect of environment oxygen content and pressure on the ignition process, flame temperature and burning rate of the propellant was investigated. The results show that gas phase reaction of propellant ignition occurs mainly in the diffusion zone of propellant thermal decomposition products and environment gas, and the first flame is away from the propellant surface when the environment oxygen content is higher than oxygen content in thermal decomposition products, but the distance between the diffusion zone and the propellant surface decreases as the pressure increases. The flame temperature is in linearly positive proportion with the environment oxygen content and pressure. The burning rate of aluminum-magnesium fuel-rich propellant increases with the increase of pressure and environment oxygen content and the effect of them on burning rate is accord with B-number theory, the pressure is the main factor affecting the burning rate, however, as the pressure increases, the effect of pressure on the burning rate is relatively reduced. The burning rate sensitivity coefficient ratio of pressure and environment oxygen content is decreased from 200 to 40 when pressure is increased from 0.1 MPa to 1.5 MPa.