The in-situ TiB₂/7050Al composite is a new kind of Al-based metal matrix composite (MMC) with super properties, such as low density, improved strength, and wear resistance. This paper, for a deep insight into its cutting performance, involves a study of the chip formation process and finite element simulation during orthogonal cutting in-situ TiB₂/7050Al MMC. With chips, material properties, cutting forces, and tool geometry parameters, the Johnson–Cook (J–C) constitutive equation of in-situ TiB₂/7050Al composite was established. Then, the cutting simulation model was established by applying the Abaqus–Explicit method, and the serrated chip, shear plane, strain rate, and temperature were analyzed. The experimental and simulation results showed that the obtained material’s constitutive equation was of high reliability, and the saw-tooth chips occurred commonly under either low or high cutting speed and small or large feed rate. From result analysis, it was found that the mechanisms of chip formation included plastic deformation, adiabatic shear, shearing slip, and crack extension. In addition, it was found that the existence of small, hard particles reduced the ductility of the MMC and resulted in segmental chips.