Porthole die co-extrusion (PDCE) is an effective strategy for fabricating high-performance laminated bimetal composites. In this study, PDCE and post-annealing treatment were employed to tailor the interfacial structure and matrix microstructure of Al/Mg/Al composite, and the ensuing evolution in the fracture behaviors and mechanical properties were systematically investigated. A mechanical bond without the formation of intermetallic compounds (IMCs) at Al/Mg interface, strip-like substructure in Al layer, and bimodal structure composed of fine recrystallized grains coexisting with coarse deformed grains in Mg layer were achieved by PDCE and maintained after annealing at 200 °C. Increasing the annealing temperature or time caused the formation and growth of IMCs (γ-Mg17Al12 and β-Al3Mg2) layers, with the growth mode transforming from a combination of grain boundary and lattice diffusion at 300 °C to the predominant lattice diffusion at 400 °C. For Al layer, the static recrystallization (SRX), normal, and abnormal grain growth could not be triggered until the temperature higher than 400 °C. However, the SRX and grain growth in Mg layer were extremely boosted as the temperature increased to 300 °C. The differences in the plasticity and strength between Al and Mg layers resulted in the multi-step fracture of Al/Mg/Al composite without IMCs. With increasing of annealing temperature, early-stage delamination of Al and Mg layers took place due to the rupture of brittle IMCs, followed by independently deformation of each constituent layers. Al/Mg/Al composite annealed at 200 °C for 1 h show superior tensile strength of 191 MPa and maximal ductility of 22.7%.