The AlN particles reinforced magnesium-aluminum matrix composites were fabricated by powder metallurgy and the damping mechanism was discussed. The results showed that the best damping capacity of composite reached with the addition of 6wt% AlN reinforcement, while the AlN particles were uniformly dispersed in the matrix. The damping capacity of composites decreases with the increasing of the reinforcement content and the experimental frequency. The internal friction peak related to dislocation appearance in the temperature ranges of 100-150°C. In addition, another internal friction peak of composites between 200 and 250°C arose, which was related to interface sliding.