Lightweight structural materials are increasingly sought after in the automotive and aerospace industries for their potential to improve fuel efficiency. Magnesium-based metal-matrix composites are potential candidates for these kinds of applications. The use of recycled carbon fibres offers further energy and cost savings. The recycled carbon fibre composites were manufactured by stir casting with high-dispersion shearing, then were extruded and subsequently heat treated. The compressive deformation mechanisms of the composites compared to AZ91 were investigated using in situ synchrotron radiation diffraction. An increase in ultimate compressive strength was achieved in the composites compared to AZ91. The deformation mechanisms active in the composites were similar to those in AZ91. Magnesium alloys in compression typically show extensive twinning; this was observed in AZ91 and the AZ91 composites. The stress required for twinning onset was increased in the composites, and the twin volume fraction at failure was decreased compared to AZ91.