Grain size of GW103K Mg alloy powder were markedly refined to about 45 nm from 20 μm by an optimized hydrogenation-disproportionation-desorption-recombination (HDDR) process. By changing temperature, hydrogen pressure and time, the optimum hydrogenation conditions are explored by orthogonal design. Then the complete dehydrogenation process was determined by using single factor control variables. Furtherly, the HDDRed powder was spark plasma sintering (SPS) sintered and hot extruded to prepare GW103K alloy bulk. XRD, OM, scanning electron microscopy (SEM), and transmission electron microscope (TEM) were used to analyze the phase transformation and microstructure evolution, based on which the grain refining mechanism during the HDDR were discussed. The optimum HDDR parameters for preparing nanocrystalline Mg alloy powders are hydriding at 550 °C under 5 MPa hydrogen pressure for 24 h and dehydriding at 550 °C for 8 h in vacuum. The nanocrystalline GW103 alloy presents a notable dimensional stability and the grain size of the alloy bulk is 43 nm after SPS and hot extrusion. As a result, the nanocrystalline GW103K specimens exhibit excellent mechanical properties compared to the coarse-grained counterparts. Especially, the nanocrystalline GW103K alloy has a tensile elongation of 21.1% which is much more than those of the as-cast and as-extrusion alloys.