Nanopowder of Al-Mg alloy was synthesized using the method of electrical explosion of thin wires of hypo-eutectic Al-Mg alloy. Thin wires of hypo-eutectic Al-Mg alloy were cut by electrical discharge machining and exploded electrically. The nanopowder obtained is examined using scanning electron microscopy (SEM) and transmission electron microscopy (TEM) for studying the morphology of the particles. TEM and SEM images substantiate the spherical structure of the nanoparticles and the diameter of particles ranges from 20 nm to 95 nm. Solid propellants were prepared by adding the alloy nanopowder as an energetic additive element with bimodal ammonium perchlorate (AP) and Hydroxyl Terminated Polybutadiene (HTPB) propellant formulations. Burning rates of the propellant with nano Al-Mg alloy powder are compared with micro aluminised propellants and propellants with micro Al-Mg powder with the same composition. Mean burn rate of 22.03 mm s-1 was obtained at a pressure level of 9 MPa with nano Al-Mg powder and 20.4 mm s-1 with micro Al-Mg powder compared to mean burning rate of 10.03 mm s-1 at 8 MPa pressure for aluminised propellants. The improved mean burn rate of propellants containing Al-Mg alloy nanoparticles could be accounted for the reduction in the size of the alloy particle and selective melting of eutectic phases along with magnesium. In the process, it gives heat feedback to the high-temperature reaction zone, which results in augmenting further reaction of metal particles. © 2020 The Author(s). Published by IOP Publishing Ltd