Tailoring the size and morphology of Al6(Mn, Fe) phase particles is expected to achieve a good combination of strength and ductility in Al–Mg–Mn–Fe alloys. In this study, the microstructural evolution in an Al–5Mg–0.8Mn–0.1Fe (wt%) alloy fabricated through continuous rheo-extrusion was investigated via scanning electron microscopy (SEM) and transmission electron microscopy (TEM). The formation mechanism of the Al6(Mn, Fe) phase particles during continuous rheo-extrusion was revealed. The contribution of the Al6(Mn, Fe) phase particles to the tensile properties of the alloy was discussed. The results indicated that a remarkable refinement effect on the Al6(Mn, Fe) phase particles during continuous rheo-extrusion was achieved. The formation of refined Al6(Mn, Fe) phase particles was primarily attributed to the coefficient of the high cooling rate and shear deformation during continuous rheo-extrusion. Compared with the as-cast alloy containing micron-sized phase particles, the rheo-extruded alloy with nanoscale Al6(Mn, Fe) phase particles exhibited a significant enhancement in strength. During tensile deformation, the small circular cracks around the nano-sized Al6(Mn, Fe) phase particles prolonged the crack propagation time. Hence, a good ductility was obtained in the rheo-extruded alloy. The purpose of this study is to provide a strategy to achieve a high-efficiency processing method and provide insights for manufacturing Al–Mg series alloys with high mechanical performance.