High-temperature superconductivity was discovered in the pressurized nickelate La₃Ni₂O₇ which has a unique bilayer structure and mixed valence state of nickel. The properties at ambient pressure contain crucial information of the fundamental interactions and bosons mediating superconducting pairing. Here, using X-ray absorption spectroscopy and resonant inelastic X-ray scattering, we identified that Ni 3\({d}_{{x}^{2}-{y}^{2}}\), Ni 3\({d}_{{z}^{2}}\), and ligand oxygen 2p orbitals dominate the low-energy physics with a small charge-transfer energy. Well-defined optical-like magnetic excitations soften into quasi-static spin-density-wave ordering, evidencing the strong electronic correlation and rich magnetic properties. Based on an effective Heisenberg spin model, we extract a much stronger inter-layer effective magnetic superexchange than the intra-layer ones and propose two viable magnetic structures. Our findings emphasize that the Ni 3\({d}_{{z}^{2}}\) orbital bonding within the bilayer induces novel electronic and magnetic excitations, setting the stage for further exploration of La₃Ni₂O₇ superconductor.