SiCp/Al composites are one kind of difficult-to-machine material. The material removal mechanism of this material is complex due to the existence of SiC reinforcement. The chip formation reflects its material removal process to a certain extent. In this article, a study of chip formation is described, and a basic physical cutting model is presented to help reveal chip formation mechanism in mill-grinding of SiCp/Al composites. The scanning electron microscope photos are used to analyze the characteristic of chip morphology. Observed results based on the materials used in the experiment indicated that there were mainly four typical chip shapes, among them schistose chips being dominant. The chip formation mechanism depended much on plastic deformation of aluminum matrix, contact position between SiC particle and diamond grit, and the removal mode of SiC particle. Under the same machining conditions, the chips generated are irregular and uneven, and include several kinds of shapes. The effect of size of SiC particles on the morphology of chips formed was also analyzed based on correlational studies and the physical cutting model for SiCp/Al composites.