Ni and carbon materials exhibit remarkable catalysis for the hydriding reaction of Mg. But the underlying mechanism of Ni/C hybrid catalysis is still unclear. In this work, density functional theory (DFT) calculation is applied to investigate the effect of Ni/C co-incorporation on the hydriding reaction of Mg crystal. The morphology and crystal structure of the Ni/C co-incorporated Mg sample show that the co-incorporated structure is credible. The transition state searching calculation suggests that both the incorporations of Ni and C are beneficial for the H2 dissociation. But Ni atom has a dramatic improvement for H2 dissociation and makes the H diffusion become limiting step of the hyriding reaction. The Ni dz2 orbit and H s orbit accept the electrons and combine together compactly, while the Ni dxy orbit is half-occupied. The catalytic effect of Ni on H2 dissociation can be ascribed to the bridging effect of Ni dxy orbit. The incorporation of C can weaken the over-strong interaction between Ni and H which hindered the H diffusion on Mg(0001). The Ni/C co-incorporated Mg(0001) shows the best performance during hyriding reaction compared with the clean and single incorporated Mg(0001).