In this paper a systematic study has been undertaken to study the effect of forging on microstructure, mechanical properties and acoustic emission (AE) characteristics of Al alloy (2014)—10 wt.% SiC metal-matrix composites. Hammer forging was carried out at a temperature of 470 °C in an open die, with a deformation ratio of 3.5:1. Microstructural analyses were carried out at three different positions of forged billet. Significant material flow was observed in the sample taken from the sides of the forged billet, but no appreciable material flow was observed at the center of the forged billet. The microstructural characterization showed that forging resulted in cracking of SiC particles in Al alloy (2014)—10 wt.% SiC composite. The AE results during forging showed an increase in AE signal intensity during the initial yielding period and a subsequent decrease in the intensity of AE signals with sudden burst at the end of the forging. The plastic deformation at room temperature was less ductile in nature but at high temperature, appreciable ductility was observed. The FESEM micrographs of fracture surfaces of the tensile specimens showed appreciable clustering of SiC particles during plastic deformation both at room and high temperature.