Laser surface alloying (LSA) of mild steel AISI 1050 using aluminum alloy (AlFeSi) was attempted. LSA was conducted by a two-step process: the alloy powder was preplaced on the surface of the substrate by flame spraying and the preplaced layer was subsequently remelted using a 2.5-kW CW Nd:YAG laser beam. The microstructures of the alloyed layers were studied by scanning electron microscopy and X-ray diffractometry. The corrosion and cavitation erosion characteristics in 3.5% NaCl solution at 23 °C were studied by potentiodynamic polarization technique and by means of a 20-kHz ultrasonic vibratory facility, respectively. The laser-aluminized layer was found to consist of a ferritic matrix reinforced with the intermetallic phases Fe3 Al, FeAl, and tiny amount of Fe2Al5. The maximum hardness achieved was 595 Hv. The cavitation erosion resistance of the laser-aluminized specimens was much higher than that of the substrate (about 17 times) due to the presence of Fe3Al, FeAl, and solid solution hardened α-ferrite. Although alloying of aluminum to the steel led to an active shift in the free corrosion potential from -610 mV to -880 mV, the specimens showed passivity with pitting and protection potentials of -650 mV and -717 mV, respectively, while the steel substrate did not. The corrosion resistance of the specimens was significantly improved after laser aluminization as evidenced by a much lower corrosion current density.