W70Cu30(W-30 wt.% Cu) alloys were fabricated using cold pressing and infiltration sintering methods from two types of powders, i.e., mixed copper-tungsten (M-Cu-W) powders and our newly developed copper-coated tungsten composite (Cu@W) powders. Microstructure, mechanical and arc-ablation properties of the W70Cu30 alloys were investigated, and the mechanism of enhanced physical/mechanical properties and arc-erosion resistance of the W70Cu30 alloys was discussed. For the W70Cu30 alloys prepared using the Cu@W powders, their physical properties, including hardness, electrical conductivity and relative density were much better than those prepared from the M-Cu-W powders. The W70Cu30 alloys fabricated from the Cu@W powders were free of cracks, and showed homogenous distributions of W and Cu network structures. Whereas for the alloys prepared from the M-Cu-W powders, segregation of Cu was observed and the segregation size was about 40–100 μm. Characterization of arc-erosion morphologies of the W70Cu30 alloys prepared with the Cu@W powders revealed the occurrence of evaporation of Cu phase; whereas that of W70Cu30 alloys prepared with the M-Cu-W powders revealed the occurrence of the sputtering of Cu. After arc breakdown for 200 times, mass loss of alloys made using the mixed powders was twice as much as those made using the coated composite powders. Based on the experimental results and theoretical analysis, an arc breakdown mechanism of the WCu-C alloys using the composite powders was proposed which is attributed to the formation of a homogeneous Cu-Cu network structure to uniformly disperse arc energy and dissipate the generated heat, thus prolonging the service life of the WCu alloy contacts.