For laser cladding of tungsten carbide reinforced iron-based layers at low mass fractions, the poor distribution of tungsten carbide results in insufficient strengthening effect. In addition, the impact toughness is weakened significantly and 316L laser cladding layer also has poor wear resistance performance in the current research. In this study, two kinds of spherical tungsten carbide particles with large size difference were used to improve the distribution of tungsten carbide particles in the cladding layer from the principle of the difference of force and motion law of tungsten carbide in the molten pool. The decomposition of tungsten carbide particles in the molten cladding was also explored to control the amount of tungsten carbide decomposition at a level that guaranteed the bond strength without affecting the performance. By ball milling 316L powder with WC particles and using laser cladding technology, three types of alloy composite coatings with 30% WC particles of different sizes (WC(L) group with 75-150 μm particles, WC(S) group with 25-45 μm particles, and WC(L/S) group with mixed coarse and fine particles) were prepared on the surface of a 316L steel substrate. The microstructure and physical phase of the composite coatings were analyzed with an optical microscope, a scanning electron microscope (SEM) and an X-ray diffractometer. The friction and wear properties and the impact toughness at room temperature were tested with a friction and wear tester and an impact toughness tester, and the post-test surface morphology was observed by confocal microscopy and SEM. Experiments showed that the use of mixed particle size WC in the 316L cladding effectively reduced the settling phenomenon of large particles during solidification and improved the uniformity of particle distribution, and the average free inter-particle distance (λ value) was reduced from 230 μm to 160 μm in the WC(L) group, with a reduction of 30.43%. Meanwhile, the WC particles and their decomposition products were found to hinder grain growth and provide non-homogeneous nucleation points to refine the grains during the solidification process after being characterized by EBSD. The friction and abrasion performance of the fused cladding layer varied with the particle size of WC particles, and the friction and wear volume loss of the fused cladding layer in the WC(L/S) group was only 3.33% of that of the group without WC, 76.60% of that in the WC(L) group, and 73.02% of that in the WC(S) group. The use of mixed particle size WC reduced the toughness weakening of the fused cladding layer by WC particles, and the impact work of the fused cladding layer at this mass fraction was 104.86% of that of the WC(L) group and 117.97% of that of the WC(S) group, respectively. When utilizing micron-sized WC particles at 30wt.% WC content, the particle size distribution significantly affects the wear resistance and impact toughness of the cladding layer. A mixed distribution of coarse and fine particles proves to be an optimal choice.