Nanostructured Mg-5%Al-x%Nd (x = 0.5, 1 and 5%) alloys were prepared by mechanical alloying (MA) starting from elemental Mg, Al and Nd powders. The mechanically milled, sintered and extruded material exhibited very high strength and ductility. To investigate the origin of the high strength and ductility, and structure-property correlation, transmission electron microscopy, X-ray diffractometry and texture analysis were carried out. The average grain size of the consolidated rods was observed to be only about 90 nm. Rationalisation of structure-property correlation involved association of high ductility with nanograin size as well as orientation of grains after extrusion. High strength was attributed not only to nanograins, but also to solid solution strengthening, dispersoids, and Orowan strengthening effect.