Laser surface treatment was carried out on AISI 416 machinable martensitic stainless steel containing 0.225 wt.% sulfur. Nd:YAG laser with a 2.2-KW continuous wave was used. The aim was to compare the physical and chemical properties achieved by this type of selective surface treatment with those achieved by the conventional treatment. Laser power of different values (700 and 1000 W) with four corresponding different laser scanning speeds (0.5, 1, 2, and 3 m•min−1) was adopted to reach the optimum conditions for impact toughness, wear, and corrosion resistance for laser heat treated (LHT) samples. The 0 °C impact energy of LHT samples indicated higher values compared to the conventionally heat treated (CHT) samples. This was accompanied by the formation of a hard surface layer and a soft interior base metal. Microhardness was studied to determine the variation of hardness values with respect to the depth under the treated surface. The wear resistance at the surface was enhanced considerably. Microstructure examination was characterized using optical and scanning electron microscopes. The corrosion behavior of the LHT samples was also studied and its correlation with the microstructures was determined. The corrosion data was obtained in 3.5% NaCl solution at room temperature by means of a potentiodynamic polarization technique.