The Mg-3% Al melt was treated by carbon inoculation and Fe addition. The influence of Fe on the formation of nucleation was investigated. That Fe inhibited the grain refinement of the carbon-inoculated Mg-3%Al alloy or not was closely associated with the operating sequence of carbon inoculation and Fe addition. Under the condition of Fe addition firstly and then carbon inoculation, the Al4C3 particles and the particles with duplex phase structure of Al4C3 coated on Al-C-Fe or Al-Fe could be observed. Both kinds of particles should act as nucleating substrates for a-Mg grains, resulting in no obvious effect of Fe on refining efficiency of carbon inoculation. Under the contrary condition, the potency of Al4C3 nucleating substrates was poisoned by transforming Al4C3 into Al-C-Fe-rich intermetallic particles, resulting in grain-coarsening.