Friction stir processing (FSP) of Mg based AE42 alloy was performed under single pass as well as double pass conditions. The evolution of microstructure was investigated using electron back scatter diffraction (EBSD) analysis. EBSD revealed that the grain size and texture varies within the nugget zone of friction stir processed region. The variation of mechanical properties across the nugget region was evaluated using nanoindentation. Hardness and Young's modulus was found to increase along the depth of the friction stir processed specimen. This was attributed to a finer grain structure with increasing depth. The friction stir processed specimen showed higher tendency toward strain hardening compared to as-cast alloy. Understanding microstructure-property relationship paves the way for optimization of FSP conditions and development of advanced functional Mg alloys. Friction stir processing (FSP) of Mg based AE42 alloy is investigated. EBSD analysis revealed that the grain size got more refined with increasing depth across the specimen cross-section. Hardness and Young's modulus is also found to increase along the depth of the friction stir processed specimen. The friction stir processed specimen show higher tendency towards strain hardening compared to as-cast alloy which is attributed to the fine in situ precipitates. © 2014 WILEY-VCH Verlag GmbH & Co. KGaA, Weinheim.