The effect of vacancies on dynamic response and spallation in single-crystal magnesium (Mg) is investigated by nonequilibrium molecular dynamics simulations. The initial vacancy concentration (Cv) ranges from 0% to 2.0%, and the shock loading is applied along [0001] and [10–10] directions. The simulation results show that the effects of vacancy defects are strongly dependent on the shock directions. For shock along the [0001] direction, vacancy defects have a negligible effect on compression-induced plasticity, but play a role in increasing spall damage. In contrast, for shock along the [10–10] orientation, vacancy defects not only provide the nucleation sites for compression-induced plasticity, which mainly involves crystallographic reorientation, phase transition, and stacking faults, but also significantly reduce spall damage. The degree of spall damage is probably determined by a competitive mechanism between energy absorption and stress attenuation induced by plastic deformation. Void evolution during spallation is mainly based on the emission mechanism of dislocations. The {11–22} <11–23> pyramidal dislocation facilitates the nucleation of void in the [0001] shock, as well as the {1–100} <11–20> prismatic dislocation in the [10–10] shock. We also investigated the variation of spall strength between perfect and defective Mg at different shock velocities. The relevant results can provide a reference for future investigations on spall damage.