Al-containing MAX phase ceramic has demonstrated great potential in the field of high-performance low-voltage electrical contact material. Elucidating the anti-arc erosion mechanism of the MAX phase is crucial for further improving performance, but it is not well-understood. In this study, Ag/Ti₃AlC₂ electrical contact material was synthesized by powder metallurgy and examined by nanoindentation techniques such as constant loading rate indentation, creep testing, and continuous stiffness measurements. Our results indicated a gradual degradation in the nano-mechanical properties of the Ti₃AlC₂ reinforcing phase with increasing arc erosion times, although the rate of this degradation appeared to decelerate over arc erosion times. Specifically, continuous stiffness measurements highlighted the uneven mechanical properties within Ti₃AlC₂, attributing this heterogeneity to the phase’s decomposition. During the early (1–100 times) and intermediate (100–1000 times) stages of arc erosion, the decline in the nano-mechanical properties of Ti₃AlC₂ was primarily ascribed to the decomposition of Ti₃AlC₂ and limited surface oxidation. During the later stage of arc erosion (1000–6200 times), the inner region of Ti₃AlC₂ also sustained arc damage, but a thick oxide layer formed on its surface, enhancing the mechanical properties and overall arc erosion resistance of the Ag/Ti₃AlC₂.