Particles cracking and debonding are important damage modes that affect the manufacturing processes of Al/SiCp composites. The study of chip formation is the most effective and cheapest way to understand the machining characteristics of a material. Therefore, a comprehensive investigation of the effects of particle damage on the chip formation is of great significance for optimizing the manufacturing processes of Al/SiCp composites. This paper aims to investigate the forming mechanism of particle damage and the effects of particle damage on the chip formation in machining of Al/SiCp composites. The followings are the contributions of this study: (1) According to microscopic observations of chip roots, the forming mechanism of particle damage was revealed. (2) Based on the microscopic observations of cross-section and fracture surface of chips, the effect of particle damage on chip formation was investigated systematically in machining of Al/SiCp composites with varying particle contents and sizes under different cutting conditions. (3) Based on different degrees of particle damage in the chip formation, three novel conceptual models of the chip formation for various fracture types were proposed to visually describe the forming process of chips in machining of Al/SiCp composites.