In order to investigate the effect of laser shock processing (LSP) on impact toughness of AZ31B magnesium alloy, AZ31B magnesium alloy samples are treated by using NdYAG laser with a wavelength of 1064 nm, a pulse width of 15 ns, a pulse energy of 10 J and a spot diameter of 3 mm. The surface layer structures of laser treated samples are analyzed by using transmission electron microscopy (TEM). Surface residual stress is assessed by using X-ray diffraction technology, the value of impact energy of samples are examined by an impact tester (Model JB-300B), and the fracture surface morphologies of charpy impacting samples are characterized by scanning electron microscopy (SEM). Test results show that a nanostructured surface layer can be fabricated on AZ31B magnesium alloy by using optimized laser parameters, and surface grain size is about 20 nm. The surface residual stress is converted from tensile stress (17 MPa) to compressive stress (-125 MPa) by LSP. The mean impact energy of samples is changed from 5.3833 J to 9.2333 J and increases by 71.5% after LSP. The impact toughness improvement of samples by LSP is attributed to a combination of surface nanocrystallization and residual compressive stress.