The multifunctional polyethylene terephthalate (PET) fabrics were successfully prepared through a dip-coating technology to endow the flame retardant and antibacterial properties of PET fabrics, which are extensively used in many fields. The flame retardant and antibacterial agent was synthesized by a double drop-reverse precipitation method and surface-modified by the mixtures of titanate coupling agents and stearic acid to result in a good compatibility of the hydrophilic nano-Mg(OH)2 and the hydrophobic PET fabrics. The results indicated that the suitable synthesis conditions of nano-Mg(OH)2 are: Mg2+ concentration 1.5 mg/mL, reaction temperature 50 °C and reaction time 50 min, and the optimal modification conditions of nano-Mg(OH)2 are: modifier ratio 5/5, modification temperature 70 °C and modification time 40 min. The flame retardant test and the antibacterial test showed that the multifunctional PET fabrics had excellent flame retardant and antibacterial properties.