The high temperature behaviour of composites with the AS21 magnesium alloy matrix, reinforced by short Saffil fibres was investigated in the temperature interval from room temperature to 300 °C. The yield stress and the maximum stress decrease with increasing temperature. Two types of specimens were investigated – one with fibres plane oriented parallel to the stress axis and the other with perpendicular fibres plane orientation. Light and scanning electron microscopy were used for study of the microstructure of composites. Possible hardening and softening mechanisms are discussed. The shear stress at fibre/matrix interface was of greatest importance in this regard, though the contribution resulting from the dislocation density increase was also significant.