A series of Mg-based alloys with composition of Mg65Y10Cu25-XAgX, x = 0, 5, 10, were selected for investigating the microstructure evolution of the Mg-based nano/amorphous-composite alloy powder synthesized by the combination method of melt-spinning and mechanical alloying (MA). The microstructure characterization of the alloy powders was conducted by means of DSC, XRD, FEG-SEM, and TEM techniques. The result of XRD reveals that the entire as-quenched alloy ribbons exhibit a broaden diffraction pattern of amorphous phase. After 50 hours milling the mixture of amorphous alloy ribbons with 5 vol.% of nano-sized ZrO2 by planetary mill, the ZrO2 dispersed magnesium composite alloy powder can reach to a homogeneous size distribution. In parallel, the MA composite Mg-based alloy powders still remain an amorphous state by the characterization of X-ray diffraction and the DSC analysis. A clear Tg (glass transition temperature) and most wide supercooled region (about 44 K) were revealed for both the Mg65Y10Cu20Ag5 alloy ribbon and the MA magnesium composite powder. In addition, the result of TEM observation also revealed that the ZrO2 with average particle size of 80 nm distributed homogeneously in the amorphous matrix of the Mg65Y10Cu20Ag5 /5 vol.% ZrO2 composite alloy powder. The interface between the ZrO2 dispersoid and the amorphous matrix of the composite alloy powder exhibits a very good bonding condition.