This study aimed to investigate the influence of process parameters on crack formation in laser alloying or cladding of grey cast iron. For this purpose, the effects of laser power and feeding rate of Ni-based alloying powders were examined. The microstructure and hardness of the coating and the interface of the coating with cast iron (bonding zone) were studied. The results showed that the dilution ratio is crucial in crack formation, explaining the challenges in achieving a defect-free laser alloying coating on cast iron. The higher dilution ratio of laser alloying resulted in higher dissolved carbon and bigger (Nb, Ti)C carbides formation than in laser cladding coatings. In this study, cracks appeared in the coating due to the combination of the high amount of carbide in the layer and a sharp hardness gradient at the interface with the cast iron substrate. An empirical relation was proposed for dilution ratio as a function of specific energy density, which combined the most critical process parameters on crack formation.