Energy consumption in electrolytic magnesium cells is well above the theoretical values. However, the mechanism of the back reaction, the main cause of the current losses, has not been fully understood yet. Magnesium dissolution into the melt is generally regarded as the limiting step for the back reaction. Accordingly, present cell designs are made with priority given to fast magnesium removal from the cell. However, experimental data and modeling results in this study indicate that the limiting step for the back reaction between magnesium and chlorine is the chlorine dissolution into the electrolyte when physical contact between electrolysis products was eliminated. Effects of chlorine bubbles on the current efficiency and the cell potential were investigated. Results show that the extent of back reaction is proportional to the chlorine surface area in contact with the electrolyte per unit time, and the cell potential increases with the amount of chlorine bubbles inside the electrolyte.