In this investigation SiC particles were added to as-cast AZ91 magnesium alloy and AZ91/SiC surface nanocomposite layer with nano-grain structure was produced via friction stir processing (FSP). Effects of process parameters, such as the rotational and traverse speeds, the FSP pass numbers and the rotational direction of FSP tool on the powder distribution pattern, microstructure, and microhardness of the developed surface were investigated. Results show that the nanocomposite layer presents higher hardness, ultrafine grains, and better homogeneity. Increasing the rotational speed increases the grain size and decreases the microhardness of the layer. Conversely, the grain size decreases by increasing the traverse speed, while the microhardness of the layer increases. Additionally, increasing FSP pass numbers leads to better distribution of nanosized SiC particles in the AZ91 matrix, refined grains, and higher hardness. Changing tool rotating direction results in higher uniform distribution of SiC particles, finer grains, and a higher hardness.