Plasma electrolytic oxidation (PEO) in an alkaline phosphate electrolyte was used to produce a novel multifunctional polytetrafluoroethylene (PTFE)-containing oxide composite coatings on AM60B magnesium alloys. The composition and microstructure of the PTFE-containing PEO coatings were analyzed by X-ray photoelectron spectroscope (XPS), X-ray diffraction (XRD), and scanning electron microscope (SEM). The electrochemical corrosion behavior, tribological properties, and wetting properties of the PTFE-containing PEO composite coatings were evaluated using potentiodynamic polarization measurements, a reciprocating ball-on-disk tribometer, and a contact angle meter, respectively. Results show that the PTFE-containing PEO composite coatings exhibited superior corrosion resistance, excellent self-lubricating property, and better hydrophobic property when compared with pure PEO coatings, and will be the attractive advanced materials for a wide range of functional applications.