Under the industrial demand of energy saving, weight loss has become one of the current concerns. By increasing the strength of Mg-Li alloy with high lithium content, the industrial demand can be met by higher specific strength. Mg-16Li-2.5Zn-2.5Er (LZ162-2.5Er) alloy is extruded at 100 °C and cold rolled subsequently. The microstructures and mechanical properties of as-cast, as-extruded and cold-rolled LZ162-2.5Er alloys were investigated. A highest specific strength of 178 kNm/kg was obtained. During extrusion, fine-grain strengthening is stimulated by dynamic recrystallization. The subsequent cold rolling increases the dislocation density and uniformizes the distribution of the second phases further, causing work hardening and dispersion strengthening. In this paper, a process of high specific strength Mg-Li alloys for lightweight industry is provided as a reference.