The effect of beam oscillating amplitude on the microstructure and performance of AZ80 Mg alloy cladded with Al-Mg alloy coating by laser–arc hybrid welding was studied. The penetration depth decreases significantly while welds are widened because of the increase in the oscillating area of a laser beam. Alloy segregation and keyhole-induced porosity can be suppressed by the laser beam oscillation. With the increase in the oscillating amplitude, the Al distribution becomes uniform in the weld seam because of the rapid and fierce stirring by the oscillating laser. However, the diluting of the cladded Al alloy restrains the formation of the brittle Mg₁₇Al₁₂ phase, and then causes the weakening of hardness and wear resistance of the cladded layer. Considered comprehensively, the optimized oscillating amplitude was 1 mm, which can produce the weld seam with good appearance, fewer segregation and porosity defects, and acceptable hardness and wear resistance.