Accumulative roll-bonding (ARB) process is appropriate to manufacture nanocrystalline and ultrafine grained sheets and plates which are most widely used material shapes in the commercial and industrial fields. The ARB process was proved to be very effective in refining grains and enhancing the strength of aluminum, steels and copper. However, the ARB was used only for cubic materials and rarely for hcp structured metal. The information available in the literatures about the microstructure change of magnesium alloys during the ARB process is still very limited. ARB was applied to AZ31 magnesium alloy sheets in the present work. ARB procedures were repeated for up to 5 cycles. Before each ARB cycle, the stacked sheets were heated at 350 ℃ for 5 min in an electrical furnace near the rolling mill. The microstructure and texture evolution of an AZ31 during ARB were characterized by electron backscatter diffraction (EBSD). The results show that ARB is an effective grain refinement method for producing AZ31 sheets with fine grain structure. Significant grain refinement was achieved after 3 ARB cycles with average size of about 2.18 μm. Grain refinement almost occured during the first three cycles and the distributions of grain size became more uniform as the cycle number increased. The results confirm the existence of critical ARB cycles to obtain dynamic balance between grain refinement and grain growth during the ARB process. Fraction of high angle grain boundaries increased with the increase of ARB cycles. Continuous dynamic recrystallization (CDRX) including rotation dynamic recrystallization (RDRX) occured during ARB of AZ31 as the grain refinement mechanisms. The dynamic recrystallization of AZ31 was activated and enhanced by the accumulated severe strain and shear strain across sheet thickness during ARB. In addition, large strain rate during ARB also contributed to grain refinement with the increase of Zener-Hollomon parameter. Microtextures of AZ31 tended to decrease and the average Schmid factor increased during the first three ARB cycles due to the sever and complex distrubution of shear strain, rotation dynamic recrystallization and rotating the new grains during ARB.