Characteristics of dielectric significantly influence machining performance of micro electrical discharge machining (EDM). A high material removal rate and large tool wear are obtained in micro EDM in liquid dielectric. Tool wear in gas dielectric is small, but the material removal rate is extremely low. In previous study, it was found that micro EDM in atmospheric pressure nitrogen plasma jet (APPJ) obtained a higher material removal rate than that in gas dielectric. However, material removal rate is still much lower than in liquid dielectric. To improve the machining performance of micro EDM in APPJ, this paper proposes micro EDM in APPJ assisted with coaxial mist (APPJ + mist). Effects of both flow rate of mist and discharge pulse energy on the critical breakdown distance, material removal rate, tool electrode wear ratio, surface roughness and profile are investigated. Experiments in nitrogen with coaxial mist (nitrogen + mist), deionized water and pure mist are also conducted for comparison. Experimental results indicate that critical breakdown distances in APPJ + mist, nitrogen + mist and mist are larger than in APPJ and deionized water. To understand the effect of misted droplets on critical breakdown distance, electric field intensity of the gap in deionized water and mist were simulated. Theoretical analysis reveals that electric field intensity on the surface of water droplet is much larger than that of tool electrode rim, resulting in the easy breakdown of gap with misted droplet. Material removal rate increases from 200 μm3/s (without mist) to 1252 μm3/s (with 5 mL/min mist) in APPJ in the case of open voltage of 100 V and capacitance of 8200 pF, which is higher than material removal rate in deionized water (1096 μm3/s) under the same discharge parameters. There is almost no tool electrode wear in APPJ + mist. The surface roughness of machined groove in APPJ + mist is 538 nm much lower than that in deionized water (672 nm), nitrogen + mist (627 nm) or pure mist (691 nm). Straighter side walls and flatter bottoms of micro grooves were obtained in APPJ + mist and nitrogen + mist than those in deionized water and mist. A micro cavity is also generated by using the proposed method without compensation of tool electrode wear.