Nb-1wt.%Zr was subjected to severe plastic deformation at room temperature using multi-axial forging (MAF) in a closed channel die to an effective strain of 4.6. Separate such MAF samples of Nb–1Zr were subsequently annealed for 1 h at 450, 550, 600 and 700 °C to study the thermal stability of the microstructure after severe deformation. Electron backscatter diffraction measurements were used to characterize the microstructure in terms of grain size, local misorientations within grains and the fraction of recrystallization after annealing using the criteria of grain orientation spread. MAF increased the strength of Nb–1Zr to 540 MPa as compared to 120 MPa in the initial coarse grained condition. Subsequent annealing resulted in regions of recrystallized grains and an overall reduction in local misorientations. Annealing at 700 °C showed a bimodal grain size distribution with large recrystallized grains surrounded by deformed regions. The tensile strength reduced with increasing annealing temperature. The as-MAF and the 450, 550 and 600 °C annealed conditions showed low ductility (16%), whereas the 700 °C annealing condition showed a moderate ductility of 28% as compared to the coarse grained condition which showed a 44% ductility. It was estimated that the contribution of strength increase after MAF was more due to increase in dislocation density as compared to the reduction in grain size.