Safe and efficient recycling of industrially generated machined chips is a high-priority technological issue. In this study, the effect of SiC particles (SiCp) on the microstructure and mechanical properties of SiCp/AZ91D composites is systematically analyzed, and the reinforcement mechanism of SiCp on composites is investigated. Different contents of SiCp/AZ91D composites are fabricated by solid-state synthesis. The results show that the incorporation of SiCp refined the grains of SiCp/AZ91D composites, which is related to the uniform distribution of SiCp at the grain boundaries. The strong bonding of SiCp with the AZ91D matrix inhibited the generation and extension of cracks, which led to the simultaneous increase in the yield strength (YS) and elongation (EL) of the SiCp/AZ91D composites. The mechanical properties of the 3 wt.% SiCp/AZ91D composites are the most superior, with an average grain size, Vickers hardness, ultimate tensile strength (UTS), YS, and EL of 6.69 ± 4.48 μm, 89.5 ± 2.5 HV, 341 ± 11 MPa, 172 ± 8 MPa, and 4.43 ± 0.18%, respectively. The reinforcement mechanisms of SiCp/AZ91D composites are mainly grain refinement and dislocation strengthening. Solid-state synthesis is an effective method for recycling magnesium alloy chips.