Magnesium metal matrix composites for lightweight brake pad applications are developed in this study. The composites are fabricated by using the powder metallurgy process. The addition of 0.5 wt.% to 2 wt.% Y2O3 (Rare Earth Oxide) used as a reinforcement to the AZ31 Mg composite is investigated. Density, hardness, and tribometer tests are carried out according to the ASTM standards. The friction and wear test of magnesium composites is tested against the grey cast iron disc. FESEM analysis shows the microstructure and morphology of worn surfaces. The elemental mapping result depicts that the elements of Mg, Al, Zn, Y, and O are uniformly distributed in the composite. X-ray diffraction analysis shows the compounds of Y2O3, MgO, ZnO, and Al2O4 are present on the worn surface of AZ31 + 2 wt.% Y2O3 composite. The outcome of the experiment reveals that increasing the proportion of yttrium oxide increases the magnesium composite's density and decreases the porosity. AZ31 + 2 wt.% Y2O3 composite exhibits the highest hardness of 122HV, a stable coefficient of friction, and a lower wear rate compared to AZ31 + 0 wt.% Y2O3 composite.