To investigate the primary factors affecting the dilution rate in the laser cladding repair process and its effect on repair performance, we implement laser cladding experiments on 300M steel surface using the new 12Cr17Ni2B stainless steel powder as the laser cladding powder. To melt the powder adequately and reduce the softening degree in the heat-affected zone, the focus of the powder stream is adjusted above the substrate surface. Scanning rate and powder heat absorption rate (the ratio of laser power to powder feed rate) experiments are performed to explore the effect regularity of these process parameters on the dilution rate. The results demonstrate that these process parameters can considerably change the dilution rate. The scanning rate changes the area of the cladding layer, and the powder heat absorption rate changes the area of the fusion zone. To clarify the effect of dilution rate on the repair performance, the process of the single factor powder heat absorption rate is designed to adjust the dilution rate, and the effect of dilution rate on repair performance is analyzed. The results demonstrate that the dilution rate has little effect on the interface bonding strength of the repaired areas; however, it affects the softening degree in the heat-affected zone. The dilution of the matrix is beneficial in terms of improving hardness in the fusion zone but an overly high dilution rate will result in the cracking of the fusion zone.