To promote green and low-carbon development in the rehabilitation of damaged asphalt pavements, a cold patching material combining magnesium phosphate cement (MPC) with emulsified asphalt (EA) was developed. This study systematically examined the impact of each preparation parameter on the performance of the composite system, including the EA to MPC ratio (A/C), the mass ratio of dead-burned magnesium oxide (MgO) and phosphate (M/P), and the dosing ratio of borax, a retarder (B/M). It also investigated their effects on workability, hydration process, mechanical behavior, and microstructure of MPC-EA. Furthermore, it elucidated the mechanism behind the loss of strength in MPC-EA. The results demonstrate that each component of MPC-EA has interdependent influences on workability. When A/C<0.2 and M/P increased to 4, there was a 5.4% to 31.5% reduction in setting time and an increase in compressive strength as well. However, when A/C>0.2, M/P gradually lost its regulating effect. EA significantly prolonged the setting time of the MPC-EA system; for instance, when A/C=0.5 (compared with MPC), setting time more than doubled but fluidity was severely impaired due to EA incorporation into the system. Additionally, borax in the MPC-EA system exhibited significant delaying effects on setting time, while positively affecting fluidity as well. Moreover, borax modulated heat release rate and cumulative heat release in MPC-EA, which influenced mechanical properties and improved microstructure within this system too. Furthermore, when A/C is not greater than 0.2, the pore structure becomes refined; however, when A/C is greater than 0.2, the porosity increases along with an increase in harmful micropores proportion within MPC-EA. The scanning electron microscope (SEM) and energy-dispersive X-ray spectroscopy (EDS) test clarified microscopic mechanisms behind strength loss in MPC-EA: inhibition of hydration product development, poor crystalline morphology, and encapsulation by asphaltene film leading to decreased mechanical strength due to incomplete reaction between hydration products and reactants.