Laser cladding was used to prepare an Al-containing Fe-Cr-C hardfacing alloy layer on a 316 L stainless steel substrate. The effects of Al addition on the elemental distribution, physical phase composition, and properties of the cladding layers were systematically investigated using experimental observations, finite-element simulation, and performance tests. Aluminum promoted the flow and elemental homogenization of the molten pool, leading to a more dispersed carbide distribution. Aluminum increased the thermal conductivity of the material and accelerated the cooling rate of the melt pool, which suppressed the eutectic reaction L → γ + (Fe,Cr)7C3 and promoted the peritectic reaction L + (Fe,Cr)7C3 → γ + (Fe,Cr)3C. Consequently, the (Fe,Cr)7C3 content decreased, whereas that of (Fe,Cr)3C increased. Aluminum improved the stability of ferrite and promoted its formation. The Al addition resulted in fine-grain, load-transfer, dislocation, and Orowan strengthening, thereby improving the hardness and wear resistance of the Fe-Cr-C hardfacing alloys. Dislocation and load-transfer strengthening were the largest contributors, followed by fine-grain and Orowan strengthening.