Laser cladding (LC) is mostly employed to enhance the wear resistance of magnesium alloy substrates. Adding nanoparticles will further strengthen the tribo surface properties, making them suitable for applications requiring lightweight components. This work investigated a dry sliding wear analysis for the laser-cladded AZ61 magnesium alloy with TiO2 nanoparticles at different volume ratios through the LC method. The spatial dispersion of the TiO2 nanoparticles in the AZ61 magnesium alloy microstructure was analyzed using scanning electron microscopy (SEM). The reinforcement ratio, sliding speed, and normal load were selected to study the tribo performance of the cladded surface. Coefficient of friction (COF) and wear loss analyses were performed using a pin on the disc dry sliding wear test. The effect of dry sliding variables on reinforcement ratio was analyzed with an orthogonal array experimental design. Grey relational analysis (GRA) studied multiple wear test responses to reveal optimal conditions to decrease the wear and friction coefficient of the AZ61 laser cladded surface. The reinforcement percentage of nanoceramic TiO2 particles in the AZ61 alloy surface was the most significant factor, contributing 97.76%, followed by a contribution of 0.26% by sliding speed and a normal load of 1.82%, confirmed with the grey relational grade. Both SEM and GRA confirmed that the reinforcement ratio of 10% exhibited lower wear loss and friction coefficient. The revealed wear mechanism operating on the worn surface of laser-cladded AZ61 magnesium alloy was micro-grooving exerted by a counter surface at all sliding conditions. This study shows that the LC of magnesium alloys will be preferred in sliding seal and lightweight gear applications.