Magnesium matrix composites are considered a desired solution for lightweight applications. As an attractive thermal management material, diamond particle-reinforced Mg matrix (Mg/diamond) composites generally exhibit thermal conductivities lower than expected. To exploit the potential of heat conduction, a combination of Cr coating on diamond particles and squeeze casting was used to prepare Mg/diamond (Cr) composites. The thickness of the Cr coating under different coating processes (950 °C/30 min, 950 °C/60 min, 950 °C/90 min, 1000 °C/30 min, and 1050 °C/30 min) was measured by FIB-SEM to be 1.09–2.95 μm. The thermal conductivity (TC) of the Mg/diamond composites firstly increased and then decreased, while the coefficient of thermal expansion (CTE) of Mg/diamond (Cr) composite firstly decreased and then increased with the increase in Cr coating thickness. The composite exhibited the maximum TC of 202.42 W/(m·K) with a 1.20 μm Cr coating layer, while a minimum CTE of 5.82 × 10⁻⁶/K was recorded with a coating thickness of 2.50 μm. The results clearly manifest the effect of Cr layer thickness on the TC and CTE of Mg/diamond composites.