Magnesium alloy is attractive for lightweight construction but often suffers from poor corrosion resistance and low strength. Cavitation processing with chemicals, i.e., multifunction cavitation (MFC), was introduced to form a high-corrosion film and improve the fatigue properties of an AZ31 magnesium alloy. Surface analysis and plane bending fatigue tests were conducted for the MFC-treated magnesium alloy at a stress ratio, R, of ̶1. The mechanical action of cavitation bubbles improved the fatigue life of magnesium alloys due to increasing the surface hardness and generating compressive residual stress. However, the combined mechanical and electrochemical action during MFC formed pits on the surface. These pits were large enough to easily nucleate an initial fatigue crack. In addition, the magnesium alloys without pit formation, for which a coating process using phosphoric acid was conducted after MFC using water, showed superior fatigue properties.