Incorporation of corrosion inhibitors into coatings on metallic substrates is an effective approach to achieve active corrosion protection and improve the overall corrosion resistance of the coated metallic substrate. PEO (Plasma Electrolytic Oxidation), apart from its good corrosion and wear properties, features a highly porous microstructure that can be leveraged as a suitable host for the corrosion inhibitors. The positive corrosion inhibition effect of a chemical on a bare metallic substrate is usually considered as the primary criterion for the selection of inhibitors to be incorporated into a PEO coating system. However, in this study, we demonstrate that 2,5Pyridinedicarboxylate (2,5PDC), as an effective universal inhibitor for bare Mg alloys, does not improve the corrosion protection performance of a PEO-coated Mg substrate and causes the PEO layer to fail faster. To uncover this adverse effect of 2,5PDC, the degradation process of the PEO-coated magnesium during immersion in 3.5 wt% NaCl solution in the presence and absence of 2,5PDC was investigated by Electrochemical Impedance Spectroscopy (EIS). In addition, local concentrations of H₂ and O₂ in the solution were measured to gain insight into the cathodic reaction rates on the magnesium substrate. The deteriorative behavior of 2,5PDC towards the PEO-coated magnesium is discussed based on the obtained results as well as the STEM and SEM observations of the PEO coating cross-section after the immersion. Complementary ToF-SIMS depth profile analysis of the corrosion product layer on a bare magnesium surface provided further insight into the mechanism of early failure of PEO-coated magnesium in the presence of 2,5PDC. The findings of this study provide a criterion for choosing an effective inhibitor for PEO-coated Mg alloys based on the interaction of the inhibitor with the PEO layer and the bare magnesium.