Microstructural evolution of Al2024 alloy, consisting of precipitates, subjected to surface mechanical grinding treatment (SMGT) was investigated to reveal the role of strain and strain rate in structural refinement. Following SMGT, a gradient nanostructure was formed on the coarse-grained substrate, with a significant increase in nanohardness to over 1 GPa at the top surface. At low strains, the presence of particles and increasing strain rate stimulated the rapid transformation of dislocation configurations. However, at larger strains, increasing strain rate effectively stabilized the fine nanoscale structure. Strain gradient from the deformed layers and near the particles significantly promoted the development of microstructure by increasing the boundary misorientations, which was more significant at high strain rates. In particular, at very high rates and large strain gradients, extreme grain sizes may be induced. The presence of minority grains with size below 10 nm in the top 20-μm layers revealed that dislocation processes still operated at sub-nanoscale level. The dislocation-governed ductility was expected to be improved in the nanostructured materials.