Micro-EDM is derived from traditional EDM (electrical discharge machining), and widely used in the micro fabrication field. By using narrow-width pulse power generators, micro-EDM can be applied to machining work with smaller gaps and at low energy levels, which demonstrates a different electro-discharge process and material erosion characteristics, compared with traditional EDM. Through in-depth study on micro-EDM and MHD (magnetic fluid dynamics), a comprehensive plasma model has been established consisting of the breakdown and the expansion stages. In addition, theoretical calculation based on the model is performed, followed by results analysis. Finally, micro-EDM experiments are conducted to verify the feasibility of the model and the correctness of the results analysis.