Magnesium (Mg) alloys are the lightest metallic structural materials, holding significant potential for automotive, aerospace, electronic, and biomedical applications. However, their broader adoption is impeded by inherent drawbacks, including low strength, limited ductility, and poor corrosion resistance. High-pressure torsion (HPT) has proven effective in generating ultrafine-grained (UFG) Mg alloys, resulting in substantial property enhancements. This review critically assesses the microstructure evolution of HPT-processed Mg alloys covering not only grain refinement but also solute segregation, texture evolution, dissolution and precipitation of second phases, allotropic transformation, crystal-to-amorphous transition and nanocrystallization. In particular, it elucidates the impact of these microstructures’ evolutions on mechanical properties, including yield strength, hardness and superplasticity. Additionally, the review discusses the improvements in the addresses the functional augmentation of HPT-processed Mg alloys, specifically corrosion behavior, hydrogen storage capabilities, and biomedical performance.