Q: Magic Keyboard's native function keys not working?

Upgrading to El Capitan fixed this for me.

I have the same issue. Thought it was my keyboard. Bought a new one and threw the old one out. Come to find out it's not the keyboard. Just wasted $50. I guess I should have done more research first.

Are you running El Cap beta?  I think the problem comes from running El Cap from its initial beta.  I reinstalled the OS (did not have to erase everything, just reinstall) and it cleared up the problem.  It will take a couple hours but you can leave the computer running and the function keys will work when it's done.

Go into preference. Make sure you have the use F1, F2 as standard keys option checked.

That solved it for me.

Because the beta of El Cap was buggy I didn't have that option for some strange reason.  Reinstall fixed it.  Thanks, though.

Deleting the Bluetooth pairing for the Magic Keyboard (via Bluetooth Preferences) and re-pairing it by plugging it into my MBP with the Lightning cable was sufficient to fix this issue for me.

(I do suspect the correlation people have suggested regarding being a user of the El Capitan Beta is correct.)

thank you, I had this issue and this solved it for me.

This was a simple fix that I found that worked for me.