Diffusion bonded Nd:YAG/Cr:YAG composite laser crystal has been employed to perform a compact diode-pumped passively Q-switched laser. At the incident pump power of 3.3 W and pulse repetition rate of 16.3 kHz, the maximum average output of 592 mW has been obtained, corresponding to an optical-to-optical conversion efficiency of 18%. Stable passively Q-switched operation with peak power of 6.5 kW and pulse duration of 6 ns was also achieved. It has been experimentally revealed that Nd:host/Cr:YAG composite structure is a promising material for compact cost-effective Q-switched laser sources with high-peak power and short pulse duration. In addition, thermal lens effect (TLE) in the active medium and its impact on the Q-switched laser performance have been analyzed.