Overcoming the strength and ductility trade-off is conducive to expanding the application prospects of the Mg matrix composites. A new approach of using the master alloy containing particulate reinforcements to achieve the strength and ductility synergy in the Mg matrix composites was proposed, which can induce the grain size bimodal structure by regulating the dynamic recrystallization (DRX). Specifically, a novel AlN-Al master alloy was prepared via powder metallurgy to fabricate the AlN/ZK60 composite, and the effects of adding the AlN-Al master alloy on microstructure evolution related to the strength and ductility synergy in the composite were thoughtfully investigated, involving precipitation, grain size, and DRX behavior. The reaction between the Al in the master alloy and the Zr in the ZK60 Mg alloy suppressed the grain refinement, and the coarse grains were further formed after the solution treatment on the as-cast composite. Subsequently, deformation heterogeneity between the AlN and Mg matrix during the hot extrusion induced discontinuous dynamic recrystallization (DDRX) and promoted fine grain fraction. The combination formed the bimodal structure in the AlN/ZK60 composite, and coarse and fine grains acted as hard and soft zones, respectively, during the room temperature deformation. The hard zone was enhanced by the basal texture strengthening, and the ductility was improved due to the promotion of the basal 〈a〉 slipping in the soft zone, jointly leading to the strength and ductility synergy in the AlN/ZK60 composite for the ultimate tensile strength increased by ∼7.4% while maintaining the same elongation compared with the ZK60 Mg alloy.