Laser surface cladding was carried out on a Mg-Al-Zn system ZM5 magnesium alloy with a mixture of Al and nano-Al2O3 powders. The microstructure, chemical composition analyses of the cladding coating were studied by scanning electron microscopy(SEM), energy dispersive X-ray analysis(EDAX).Both the coating and substrate were identied by microhardness tester. The laser cladding showed very good bonding with the magnesium alloy substrate. The Al2O3 particles partially or completely melted during laser irradiation and re-solidified with irregular shapes in the size range of 5–60 µm along with a few islands as large as 500 µm, within the grain-refined Mg-rich dendritic matrix. The improvement in microhardness after cladding was attributed to the presence of ultra-hard Al2O3 particles, increased solid solubility of Al and a very fine dendritic microstructure as a result of rapid solidification induced by laser cladding process. And corrosion resistance of the cladded coating was enhanced compared to that of the as-cast substrate after immersion tests.