The current research investigates the effects of erbium addition and heat treatment on the microstructural characteristics, hardness response, tensile properties, and fatigue behavior of the Al–15%Mg2Si composite. The results revealed that erbium acts as a modifier, facilitating the achievement of optimum microstructural characteristics, thereby enhancing the overall mechanical performance of the composite. Quantitative analysis has indicated that adding 0.5% erbium results in an average size, density, and aspect ratio of 29.7 μm, 594 mm−2, and 0.83 for primary Mg2Si particles, respectively. These numbers represented the best findings compared to outcomes obtained for different erbium contents. Also, both unmodified and erbium-modified composites exhibited further favorable microstructural modifications, after T6 heat treatment. A noticeable increase in hardness (16%), from 96.3 HV to 111.8 HV, was observed for the composite containing 0.5% erbium after the combined erbium addition and heat treatment. Moreover, for this composite the yield strength, ultimate tensile strength, elongation, and toughness increased by 66.3%, 70.3%, 160.4%, and 313.4%, respectively, compared to the original composite. Microstructural modifications achieved through the optimized erbium addition and subsequent heat treatment significantly enhanced the fatigue life from 679 cycles to 40,002 cycles due to the effective mitigation of stress concentration and its detrimental effects.