In this paper, the damping capacities and damping mechanisms of high damping, graphite-reinforced Mg97Zn1Y2 composites were investigated. Composites consisting of different graphite particle sizes (24, 11, and 3 μm) were designed and prepared using the casting method. The microstructure of the composites was examined using optical microscopy (OM) and transmission electron microscopy (TEM), which confirmed that the graphite particles were successfully planted into the Mg97Zn1Y2 matrix. Measurements made with a dynamic mechanical analyzer (DMA) showed that the Grp/Mg97Zn1Y2 composite has a high damping capacity. At the anelastic strain amplitude stage, the damping properties of the Grp/Mg97Zn1Y2 composites were found to be higher than those of the Mg97Zn1Y2 alloy. Furthermore, decreasing the graphite particle size was found to improve the damping properties of the Grp/Mg97Zn1Y2 composites. At the microplastic strain amplitude stage, the damping properties of the Mg97Zn1Y2 alloy were found to be higher than those of the Grp/Mg97Zn1Y2 composites. Moreover, the damping properties of the Grp/Mg97Zn1Y2 composites were found to decrease with increasing graphite particle size. The reason for the increased damping of the Grp/Mg97Zn1Y2 composites during the anelastic strain amplitude stage can be attributed to the increase in the number of damping sources and weak interactions among the dislocation damping mechanisms. At the microplastic strain amplitude stage, the damping properties of the composite are mainly affected by the activation volume of the slipped dislocation.