In the present work, Al2O3–M7C3 particle reinforced iron matrix composite coatings were fabricated on a steel substrate by laser cladding with different mixtures of Fe-based alloy powder and Al/Fe2O3 thermite reactants. The microstructure of the composite coating was investigated by X-ray diffraction (XRD), optical microscope (OM), scanning electron microscope (SEM) and transmission electron microscope (TEM), respectively. The hardness and dry sliding wear properties of the composite coatings were also investigated by Vickers microhardness and block-on-ring dry sliding wear test. The results show that Al2O3 ceramic and M7C3 carbide are in situ synthesized by laser cladding. With the increase of thermite reactants, the amount of Al2O3 ceramic and M7C3 carbide in the composite coatings increases gradually. The microstructure is characterized by a cellular dendritic structure at the bottom, a typical cellular microstructure in the middle and an equiaxed crystal at the top of the composite coatings. The increased thermite reactants significantly enhance the microhardness and the wear resistance of the composite coatings, which should be ascribed to the grain refinement strengthening, precipitation hardening and solid solution strengthening.