Maraging steel is one of the exotic materials showing the potential for application in the field of the aerospace industry. However, machining these materials with high surface quality and material removal rate is problematic. The micro-electro chemical discharge (MECDM) process is capable of resolving this problem to some extent, however, due to the spark action, it fails to attain a high surface finish. In the current investigation, micro-hole drilling is performed on maraging steel with powder-mixed alumina (1% wt. of Al2O3) using the micro-electro chemical discharge machining (PMECDM) process. The effect of different input process factors, for example, voltage (V), duty cycle (D), the electrolyte concentration (C), are considered for investigating the machining performance, i.e., rate of material removal (MRR) and roughness of surface (SR) of the machined substrate. Further, a comparative analysis is established between micro-ECDM (MECDM) and mixed powder ECDM (PMECDM). The Box–Behnken design is used to conduct all the experiments and analysis of variance (ANOVA) is used to optimize the results. The outcomes reveal that MRR in PMECDM is enhanced by 34%, and the average surface roughness is reduced by 21% over the MECDM process. The maximum MRR was observed to be 2.44 mg/min and the hole machined by the PMECDM results in a cleaner hole wall surface than the MECDM process due to the grinding action by the powder particles. The residual stress measurement indicates that the PMECDM (−128.3 ± 3.85 MPa) has the lowest equivalent stress as compared to the parent material (−341.04 ± 10.24 MPa) and MECDM (−200.7 ± 6.02 MPa) surfaces. The applied voltage is the most significant parameter, followed by the duty factor and electrolyte concentration for enhancing the MRR and surface finish. The addition of powder improves the surface integrity of the machined surface as compared to the surfaces produced by the MECDM processes.