Magnesium matrix composites reinforced with AlN particles were fabricated by the powder metallurgy technique. Different mixing methods were used in this study to control the distribution of AlN particles. The microstructure, thermal diffusivity and thermal expansion of the Mg-Al/AlN composites using different mixing methods were investigated. The results showed that the intergranular and intragranular distributions of AlN particles were obtained, respectively, by controlling the mixing methods. The composite with intragranular particles exhibited lower thermal diffusivity because of the existences of more interfaces, defects and grain boundaries, which acted as scattering centers and reduced the mean free path of electrons and phonons. The existence of AlN particles lowered the coefficient of thermal expansion (CTE) and enhanced the dimensional stability of the composites. And the use of the improved mixing method further reduced the CTE of Mg-Al/AlN composites.