A preparation method of a fine-grain Mg-based composite material comprising AlN (aluminum nitride) particles includes: putting magnesium powder, aluminum powder, AlN powder and stearic acid into argon-shielded nylon ball-milling jar after weighing, and putting the jar on a wheel grinder to perform low-speed long-time ball milling and mixing to obtain an evenly-mixed composite powder material; filling a graphite jig with the powder material evenly, putting the graphite jig into a hot-press sintering furnace, vacuumizing the sintering furnace, increasing the temperature in a vacuum state, continuing temperature rise in an argon shielding state when the temperature rises to a certain degree, and increasing pressure to perform hot-press sintering; polishing a sintered sample surface, and performing plastic deformation to obtain the fine-grain Mg-based composite material comprising the AlN particles. The prepared AlN particle reinforced Mg-based composite material has the advantages of high compactness, small base grain, uniform distribution of reinforcements, high interface adhesion and good mechanical and physical performance.