In this paper, the morphological characteristics of arc plasma and droplet transfer during the alternating magnetic field-assisted narrow gap groove laser-MIG (metal inert gas) hybrid welding process were investigated. The characteristics of arc plasma and droplet transfer, electron temperature, and density were analyzed using a high-speed camera and spectrum diagnosis. Our results revealed that the arc maintained a relatively stable state and rotated at a high speed to enhance the arc stiffness, and further improved the stability of the arc under the alternating magnetic field. The optimum magnetic field parameters in this experiment were B = 16 mT and f = 20 Hz, the electron temperature was 9893.6 K and the electron density was 0.99 × 1017 cm−3 near the bottom of the groove, which improved the temperature distribution inside the narrow gap groove and eliminated the lack of sidewall fusion defect. Compared to those without a magnetic field, the magnetic field could promote droplet transfer, the droplet diameter decreased by 17.6%, and the transition frequency increased by 23.5% (owing to the centrifugal force during droplet spinning and electromagnetic contraction force). The width of the weld bead was increased by 12.4% and the pores were also significantly reduced due to the stirring of the magnetic field on the molten pool.