The effects of underwater friction stir welding (UFSW) on mechanical properties, strain hardening behavior, and formability of dissimilar materials of AA5052-O and AA6061-T6 welded joints were investigated. The mechanical properties of the UFSW joints exhibited higher strength and higher joint efficiency than the conventional friction stir welded joints (CFSW). The maximum joint efficiency of 73% has been attained for UFSW joints, which is due to the effect of welding atmosphere. The hardness of the stir zone (SZ) and heat affected zone (HAZ) are also obtained higher for the UFSW joints. Moreover, the hardening capacity, strain hardening exponent and formability of the UFSW joints were greatly improved over the CFSW joints. The improvement in mechanical properties of the UFSW joints is mainly due to faster cooling rate during welding. The microstructural characteristics revealed the formation of fine grains in the UFSW joints compared to the CFSW joints.