The study intends to unravel the processes behind the particular forming and performance improvement of 6061-T6 aluminum alloy joints by getting a thorough understanding of keyhole features and dynamical characteristics of molten pools during the laser welding with circular oscillation (C-OLW) process. The C-OLW experiments were carried out considering the pivotal parameters, including oscillation frequency (f) and amplitude (A), and their impacts on joint formation, microstructure, and performance were analyzed. Increasing f from 200 Hz to 300 Hz results in a more homogeneous and centered laser energy distribution, reducing weld breadth and the maximum depth. Raising A from 1.2 mm to 1.5 mm concentrated energy along the workpiece surface, increasing weld breadth but decreasing the maximum weld depth. A three-dimensional transient numerical model was established and verified. The simulation results reveal that increasing f considerably improves keyhole stability by virtue of the beam's mixing effect on energy, resulting in a more evenly distributed temperature within the molten pool. The velocity of the beam's motion intensifies, leading to elevated local temperature and subsequently causing an escalation in splattering. When A grows, keyhole stability reduces, as does the intensity of molten pool flow. The major effect of increased frequency is refining the grain size while increasing amplitude primarily promotes the columnar-to-equiaxed transition (CET) process. The extracted results of temperature distribution illustrate that an increase in f leads to an increase in the solidification rate (R), and temperature gradient values (G) are similar or higher along the same isotherm. Therefore, the G/R ratio rises, promoting the formation of finer microstructures. Although increasing A diminishes G, the reduced overall temperature and molten pool volume contribute to the rise in R. Consequently, the G/R ratio declines, fostering equiaxed grain growth, in line with experimental observations. A higher G value on the left side corresponds to finer grain structures, corroborating experimental findings via Electron Backscatter Diffraction (EBSD). The keyhole stability and microstructure characteristics explain why increasing f or A can enhance joint performance. The research reveals that strategically augmenting both oscillation frequency and amplitude enables the achievement of enhanced performance in 6061-T6 aluminum alloy joints.