The evolution of the microstructure of reaction regions in as-welded and annealed states was thoroughly investigated by SEM and TEM in the eleven-layered AZ31/AA1050 composite plates fabricated via a single-shot explosive welding process. With the detonation velocities used, only the first and second interface is wavy, while the others are flat. Near all interfaces, local melting and rapid solidification processes lead to the formation of reaction regions composed of phases of different chemical compositions and structures. Even though 2 equilibrium phases of γ-Mg17Al12 and β-Mg3Al2 have been found a large part of the solidified melt region consists of non-equilibrium phases that exhibit an amorphous or ultrafine-grained structure. Further heat treatment of the multilayer composite resulted in rapid nucleation and growth of the γ-Mg17Al12 and β-Mg2Al3 phases in the form of hard layers. Within the pre-existing reaction regions, the systematic transformation of phases of different chemical compositions into one β-Mg2Al3 phase was observed. It was found that using a pressure of 3 MPa is very important in preventing delamination of the clad during heating, but it is not able to block the formation of the linear cracks in the β-Mg3Al2 phase, which crucially reduces the composite formability.