The WE43 magnesium alloy, in case of improved toughness, can be an appealing material for biomedical applications. The effects of equal-channel angular pressing (ECAP) and post-deformation aging (PDA) on the mechanical behavior of the WE43 alloy were investigated in this study. ECAP of WE43 magnesium alloy at room temperature is extremely challenging because of the insufficient number of slip systems. An optimized core–sheath configuration is proposed, which applies fully compressive stress on the WE43 alloy as the core, resulting in ECAP of the WE43 alloy at room temperature. Unprecedented strain-induced precipitation of both Mg41Nd5 and Mg24Y5 was observed owing to stored mechanical energy and temperature raise in the adiabatic shear bands during ECAP at room temperature. Moreover, the formation of oriented needle-like Mg3(Y, Nd) precipitates and partial recrystallization simultaneously increased the strength to 410 MPa and the strain to fracture to 11.4% after PDA. A combination of bimodal grain size distribution and a high volume fraction of precipitates increased the toughness to 38.96 MJ/m3 after ECAP and PDA.