Magnesium alloys are commonly melted and held in steel or cast iron crucibles and small but important amounts of Fe and C can dissolve into Mg-rich melts. Here, carbide formation is studied during interface reactions between solid Fe-xC alloys (x= 0 -3.6 wt.%) and liquid Mg-9Al-0.7Zn-0.2Mn (wt.%, AZ91) at temperatures from 700 -800 C. Two ternary carbides, AlFe3C and Al2MgC2, formed in the reaction layers between the Fe-C and AZ91, and T2-Al2MgC2 additionally formed within the AZ91 alloy due to carbon pickup. T2-Al2MgC2 grew in liquid AZ91 as hexagonal plates that were commonly twinned. A reproducible orientation relationship was measured between T2-Al2MgC2 and -Mg, and the grain refinement of magnesium by heterogeneous nucleation on T2-Al2MgC2 is explored.