Aluminum Matrix Composite (AMC) represents an innovative class of materials that is extensively utilized in industries such as automotive, defense, aerospace, structural engineering, sports, and electronics. This study investigates the thrust force, exit burr formation, changes in the micro-tool, and drilled hole diameters during the micro-drilling of an aluminum-polyethylene composite panel (Al–PE). The panel consists of 3501 series aluminum skin materials bonded to a polyethylene (PE) core. Micro-drilling test parameters were designed using Taguchi’s L16 (4223) orthogonal array. Tests were conducted with five control parameters: cutting speed with four levels (10 m/min, 20 m/min, 30 m/min, 40 m/min), feed rate with four levels (0.5 µm/rev, 1 µm/rev, 2 µm/rev, 4 µm/rev), the tool diameter with two levels (0.7 mm, 1 mm), and tool point angle with two levels (100°, 140°) using both AlTiN-coated and uncoated drills. The maximum thrust force (Fz), maximum burr height, and changes in both the drill tool and hole diameters were measured for analysis of variance (ANOVA). The results showed that, in terms of impact on Fz, tool point angle had the highest positive influence (64.54%) on the micro-drill at the entrance of composite (upper aluminum plate). The cutting speed had the highest positive influence (45.32%) on the tool in the core layer (PE core layer). The tool point angle also had the highest positive influence (68.95%) on the micro-drill at the lower layer of the composite (the lower aluminum plate). There was noticeable chip adhesion on the major cutting edge and nose area under micro-drilling conditions with higher thrust forces and burr height. The AlTiN coating had a positive effect on tool wear and hole diameter deviations, but it adversely affected the burr height.