The cast microstructure of a Mg-13Zn-1.55Y alloy (ZW132) with a high volume fraction of I-phase (7.4%) was refined considerably by severe plastic deformation via high-ratio differential speed rolling (HRDSR). Ultrafine grains (0.7–1.3µm) with high angle boundary fractions of 0.48–0.50 were obtained after HRDSR with speed ratios of 2 or 3. The alloy processed at a speed ratio of 3 exhibited high strength and high ductility, with a yield stress of 332MPa and a tensile elongation of 16.3%. The ductility of the rolled ZW alloy was controlled by the work hardening rate, which increased as the amount of I-phase, the degree of refinement of the eutectic I-phase pockets, the degree of dispersion of the broken I-phase particles over the matrix, and the size of the resultant grains increased. A model that considers the contribution of these factors to the work hardening rate was proposed. Grain-size reduction was found to be a major strengthening mechanism. Dispersion of the I-phase particles broken from the eutectic I-phase pockets did not contribute significantly to the material's strength.