Laser surface quenching (LSQ) was performed on AISI P20 mould and hot-working die steel with an objective to improve surface characteristics. The steel was treated under three different process parameter conditions. The microstructure, element distribution and residual stresses were investigated through SEM, EDS and XRD analyses. The effect of laser energy density on carbide dissolution/ablation, microstructure evolution were thoroughly investigated. The dissolution/ablation of carbides significantly affected the formation of martensite and retained austenite, and the distribution of elements and phase in the microstructure. The results of the study and analyses of treated surface revealed that the LSQ treatment significantly improved the microstructure, eliminated the pores or other defects. Furthermore, the degree of carbide dissolution/ablation was closely related to the laser energy density. Comparing to Cr7C3, Cr3C2 was more difficult to dissolve at lower laser energy density. Thus, those incompletely dissolved Cr3C2 would hinder the growth of austenite and reduce the carbon content in austenite and lead to the formation of low-carbon martensite. The highest laser energy density (150 J/mm2), was able to produce finer microstructure and significantly reduced the inhomogeneity in distribution of Cr between the poor and the rich Cr areas.