This paper describes the terahertz-wave generation characteristics and mechanism of a terahertz-wave parametric oscillator (TPO) using MgO:LiNbO3, which has high optical damage resistance. We have observed that congruent MgO:LiNbO3 shows fivefold higher THz-wave output characteristics compared to undoped LiNbO3. To find the optimum concentration of MgO and to study the mechanism of output increase, we measured the THz-wave parametric generation (TPG) and far-infrared spectral characteristics of MgO:LiNbO3 samples having different doping concentration. We found that the optimum concentration is 5 mol% and that output is increased due to an increase in parametric gain resulting from the increased Raman scattering cross section and increased lifetime of the lowest A1-symmetry phonon mode. © 2002 Wiley Periodicals, Inc. Electron Comm Jpn Pt 2, 85(4): 22–29, 2002; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/ecjb.1101 [ABSTRACT FROM AUTHOR]