It has been demonstrated recently that intensive melt shearing can be an effective approach to the grain refinement of both shape casting and continuous casting of Mg alloys. In the present study, the mechanisms of grain refinement by intensive melt shearing were investigated through a combination of both modelling and experimental approaches. The measurement of the cooling curves during solidification, quantification of grain size of the solidified samples, and image analysis of the MgO particle size and size distribution in the pressurized filtration samples were performed for the AZ91 alloy with and without intensive melt shearing. The experimental results were then used as input parameters for the free growth model to investigate the mechanisms of grain refinement by intensive melt shearing. The experimental results showed that, although intensive melt shearing does not change the nucleation starting temperature, it increases the nucleation finishing temperature, giving rise to a reduced nucleation undercooling. The theoretical modelling using the free growth model revealed quantitatively that intensive melt shearing can effectively disperse MgO particles densely populated in the oxide films into more individual particles in the alloy melt, resulting in an increase in the MgO particle density by three orders of magnitude and the density of active nucleating MgO particles by a factor of 20 compared with those of the non-sheared melt. Therefore, the grain refining effect of intensive melt shearing can be confidently attributed to the significantly increased refining efficiency of the naturally occurring MgO particles in the alloy melt as potent nucleation sites.