The evolution of microstructure and mechanical properties of the continuous rheo-rolled AZ91 magnesium alloy during heat treatment was revealed in the present study. Two kinds of Mg17Al12 phases precipitated from the supersaturated magnesium matrix were observed: most of which distributed discretely at grain boundary while the rest precipitated in alloy matrix in small size. With higher aging temperature, atom diffusion velocity increased and more precipitates formed. As a result, the hardness and the tensile strength peaked at 16h, whilst the elongation decreased with increasing time and temperature. The optimal comprehensive mechanical properties were obtained after solution treatment at 415 °C for 20 h and aging treatment at 220 °C for 16 h. The tailored hardness, tensile strength and elongation of the rheo-rolled alloy after heat treatment reached 99 HV, 251 MPa and 4.5%, respectively, which were significantly higher than that of the untreated alloy. Compared with traditional processing methods, rheo-rolling followed by heat treatment demonstrates its effectiveness on tailoring and obtaining balanced mechanical properties of AZ91 alloy.