Fe-based amorphous coatings (AMCs) were deposited on AZ31B magnesium alloy substrates via detonation spraying. The study focused on assessing the influence of these coatings on the tensile properties, damage evolution, and primary factors affecting the samples through heat treatment, tensile testing, and finite element analysis. The research findings highlighted a detrimental effect of the AMC on both fracture elongation and tensile strength of the magnesium alloy substrate. Specifically, the thin-coated samples (237 μm) experienced a decrease of 52.4% and 12.8%, respectively, while the thick-coated samples (362 μm) were less affected due to the easy debonding of the coating-substrate interface. The study also emphasized the critical role of cracking resistance at the substrate near the interface in determining the overall tensile properties of the coating-substrate system. It was found that annealing heat treatment, which leads to the formation of equiaxial grains near the interface of the substrate, significantly improves the tensile properties. On the other hand, samples subjected to cryogenic cycling treatment (CCT), resulting in an increased zone of deformation twinning, displayed the most adverse effects on performance. Therefore, annealing heat treatment proves to be an effective method for improving the tensile properties of magnesium alloys coated with Fe-based AMC.