Graphite powder mixed electrochemical discharge machining (GPM-ECDM) is an effective technique for micromachining of hard and brittle nonconductive materials. To reveal the mechanisms of discharge and material removal in GPM-ECDM the voltage and current signals obtained in the electrolyte with and without graphite powder were experimentally investigated, and it was observed that there were two types of discharges in the GPM-ECDM. The influences of adding graphite powder to the electrolyte on the machining of microcraters and microgrooves were studied. The analysis of the machining results revealed that the workpiece material was removed by both the general electrochemical discharge and the discharge occurring on the graphite powder. Compared to the machined surface obtained in conventional electrolyte, the surface roughness decreased by 30–56% when using the graphite powder mixed electrolytes with particle diameters of 1 μm or 18 μm.