This review paper deals with the FRICTION STIR PROCESSING (FSP) for manufacturing of metal-matrix composites (MMCs) based on the Mg-8Al-0.5Zn (AZ80) magnesium alloy. Accordingly, the reported investigations on the AZ80 surface composites with various reinforcements, including the carbon nanotubes (CNTs), high-entropy alloys (HEAs), hybrid reinforcements, and composite plates, were summarized. Accordingly, the effects of introducing the second-phase particles, tool rotation rate, tool traverse speed, tool design, and vibration were considered. In this regard, the grain refinement by dynamic recrystallization (DRX) and Zener pinning effect, the uniformity of the particle distribution and avoiding agglomeration, and improvement of mechanical properties and wear behavior were critically discussed. Moreover, useful suggestions for future works were proposed, including focusing on the common reinforcing phases and PROCESSING parameters, tensile testing to evaluate the strength-ductility balance, metal additive manufacturing processes, and the correlation of DRX grain size with the Zener–Hollomon parameter similar to hot deformation studies.