Metal matrix composites (MMC) possess an excellent combination of mechanical and metallurgical properties but are difficult to process. Laser-directed energy deposition (DED) technique can be effectively employed to fabricate MMC coatings, producing dense coatings with sound metallurgical bonding. In this investigation, Inconel 718/ alumina (Al2O3) MMC coating is manufactured using powder-fed laser DED process. At first, different wt. % of alumina particles (i.e., 1, 3, 5, and 7 wt%) were mixed with Inconel 718 powder, and after that, four different types of MMC coatings were fabricated. By analyzing the mechanical properties and microstructure of those MMC coatings, the optimum amount of Al2O3 in MMC coating is determined. It is observed that IN718 −5 wt% Al2O3 composite coating exhibits better mechanical properties (i.e., hardness = 625 ± 6 HV), so further experiments were conducted with this coating. In the second phase of this investigation, the effect of laser power, scanning speed, and powder feed rate on porosity is analyzed. Beyond a laser power of 1700 W, porosity increases significantly due to the formation of gas porosity. On the other hand, beyond a scanning speed of 500 mm/min, the energy input is insufficient to melt the powder, which leads to the enhancement of lack-of-fusion porosity. With an increase in the powder feed rate, the lack of fusion porosity grows due to a higher laser power attenuation. The mid-range of laser power and scanning speed and lower range of powder feed rate are suitable for creating MMC coatings with better mechanical properties.