Magnesium (Mg) metal is a promising anode for high-energy, cost-effective multivalent metal batteries but suffers from severe surface passivation, especially in aqueous solutions. This research reveals that MgH₂, along with MgO and Mg(OH)₂, forms during water-induced Mg passivation. The formation mechanism, spatial distribution, and detrimental effects of MgH₂ are revealed through experiments and theory. A graphite-based hydrophobic and Mg²⁺-permeable interphase, applied via pencil drawing, enables stable cycling in symmetric cells (>900 h) and full cells (>500 cycles) even after water contact. This understanding of MgH₂-involved passivation and the design of waterproof Mg anodes advances Mg metal battery development.