A facile method to fabricate three-dimensional branched ZnO/MgO nanowire heterostructures and their application as the efficient light-extraction layer in light-emitting diodes are reported. The branched MgO nanowires are produced on the hydrothermally-grown ZnO nanowires with a small tapering angle towards the tip (≈6°), by the oblique angle flux incidence of MgO. The structural evolution during the growth verifies the formation of the MgO nanoscale islands with strong (111) preferred orientation on very thin (5–7 nm) MgO (110) layer. The MgO nanobranches, then grown on the islands, are polycrystalline consisting of many grains oriented in specific directions of <200> and <220>, supported by the nucleation theory. The LEDs with the branched ZnO/MgO nanowire arrays show a remarkable enhancement in the light output power by 21% compared with that of LEDs with pristine ZnO nanowires. Theoretical calculations using a finite-difference time-domain method reveal that the nanostructure is very effective in breaking the wave-guiding mode inside the ZnO nanowires, extracting more light especially in radial direction through the MgO nanobranches.