The magnesium alloy exhibits a notable plasticity limitation due to its hcp structure. In recent years, the development of a bimodal structure, consisting of deformed coarse grains and recrystallized fine grains, has emerged as an effective strategy to balance the strength and plasticity of magnesium alloys, offering a new avenue for property. This optimization study investigates the formation mechanism and deformation behavior of the bimodal structure in AZ31 magnesium alloy by controlling the extrusion process. The formation of the bimodal structure is attributed to the incomplete dynamic recrystallization during plastic deformation and the particle-stimulated nucleation effect of the secondary phase. During deformation, fine grains endure higher stresses, while coarse grains accommodate more strain. The fine grains significantly contribute to the improved strength of the AZ31 magnesium alloy, while the coordinated deformation of the coarse grains ensures excellent plasticity. Leveraging the superior deformation capability of the bimodal structure, fine-grained AZ31 magnesium alloy was successfully fabricated through further extrusion, achieving outstanding mechanical properties: a tensile strength of 265 MPa, a yield strength of 112 MPa, and an elongation of 19%. This demonstrates the synergistic enhancement of strength and plasticity.