Laser shock peening is an innovative surface treatment, which has been shown to greatly improve the fatigue performance of Ti-17 alloy. This work investigates the impact toughness of Ti-17 treated by LSP with different laser energies. The results show that impact toughness increases by 2.1%, 11.7%, 64.1%, and 53.5% compared with a non-peened surface as the laser energy changes to 1, 3, 5, and 7 J, respectively. Ti-17 exhibits a hardened layer after peening. A residual compressive stress of 382 MPa is induced after four impacts with a laser of energy 5 J. Fracture surface analysis and transmission electron micrographs are used to observe the microstructural changes. The micrographs establish a cleavage mechanism combined with the formation of a few dimples. The proliferation and tangling of dislocations in Ti-17 occurs and the dislocation density increases after LSP treatment. In addition, deformation twins are found after LSP treatment, which are helpful in improving the plasticity of the titanium alloy.