The aqueous Mg-air battery is an attractive candidate for some electric vehicle applications due to its high theoretical specific energy, environmentally and physiologically benign properties, and implied low cost from using earth-abundant materials. However, the experimentally observed potentials (1.6-1.2 V) are far from the thermodynamically predicted value of 3.09 V, based on the free energy of formation for the reaction Mg (s) + 1/2 O2 (g) + H2O (l) ⇌ Mg(OH)2 (s). It is generally believed that this large difference is principally due to the presence of Mg corrosion giving rise to a net corrosion potential, and that it would be possible to nearly obtain the full potential of 3.09 V if corrosion were completely suppressed. In this contribution, we present a density functional theory study of the hydroxide-assisted Mg anodic dissolution mechanism in the aqueous Mg-air battery. We show that the Mg surface is expected to be highly OH∗-covered in the anodic dissolution process, and that the calculated intrinsic limiting potentials are in fact in reasonable agreement with experimentally observed potentials. These limiting potentials are dictated by sequential electrochemical adsorption of hydroxide to the Mg surface, and therefore, the bulk free energy of Mg(OH)2 (s) formation cannot be used to predict the intrinsic anode potential in the aqueous Mg-air battery. These intrinsic limits imply that completely suppressing Mg corrosion will not significantly increase the potential available for the Mg-air battery.