Top ceramic coatings were fabricated on the laser surface melting (LSM) modified AZ31 alloy by plasma electrolytic oxidation (PEO) in a phosphate electrolyte. The effect of LSM treatment on the microstructure and corrosion behavior of the bare and PEO treated AZ31 alloy was evaluated. Results showed that LSM treatment produced a homogeneous modified layer with redistributed intermetallic compounds, resulting in enhanced corrosion resistance of AZ31 alloy. The LSM treatment had no obvious influence on the surface and cross-sectional microstructures of the PEO coatings on AZ31 alloy. Besides, MgO was the main constituent for PEO coatings, regardless of LSM pretreatment. However, the long-term corrosion properties of the PEO coated AZ31 alloy with LSM pretreatment revealed large enhancement. Based on the analysis of microstructure and corrosion property, the corrosion mechanisms of the PEO and LSM-PEO coated AZ31 alloy were proposed.