Multipass friction stir processing (FSP) was performed on as-cast (AC) AZ91 magnesium alloy with different tool probe lengths to introduce layered microstructure through the thickness. Three microstructural variations were developed. They were, half thickness fine grain microstructure (HFG), surface modified-fine grain microstructure (SFG) and full thickness fine grain microstructure (FFG). FSP was performed at tool rotation rate of 720rpm and transverse speed of 150mm/min. The coarse α-Mg dendrites of 100μm were refined to approximately 2μm. Network of β-Mg17Al12 interdendritic particles were broken and distributed uniformly after multipass FSP. Tensile test and notch fracture toughness test were conducted to understand the effect of layered microstructure on mechanical properties. The tensile properties, namely, yield strength, tensile strength and percentage elongation of AC material were found to be 92MPa, 100MPa and 0.8% respectively and the corresponding values for FFG were improved to 242MPa, 327MPa and 4.7%. For HFG and SFG, these values were found to follow the rule of mixture. Similarly, apparent fracture toughness (KQ) values of single edge notch bend (SENB) specimen without precrack were compared and the results showed improvement from 6.2MPa√m in AC to 12.3MPa√m in FFG.