The influence of additional low-temperature annealing on microstructure, strength and electrical сonductivity of Al-0.4Zr alloy has been studied. The alloy was preliminarily aged by long-term annealing at 375 °С for 60 h and processed by high pressure torsion (HPT), resulting in formation of ultrafine-grained (UFG) structure. Additional annealing of the alloy with a UFG structure at 230 °С for 1 h leads to substantial enhancement of strength (the yield stress by 40% and ultimate tensile strength by 20%). The hardening effect increases with increasing the annealing time to 3 h, and then it reduces smoothly. The strength enhancement due to annealing is accompanied by an increase in the electrical conductivity. The best combination of strength (the yield stress 149 MPa, the ultimate tensile strength 163 MPa) and electrical conductivity (55% IACS) was achieved after annealing for 3 h. The experimentally obtained changes of the yield stress and electrical resistivity at 77 К due to annealing are compared with the theoretical estimates. The analysis shows that the low-temperature annealing induces additional hardening mechanism in the UFG Al-0.4Zr, which is most likely associated with the rearrangement of high angle grain boundary structure. The obtained results suggest a new way to increase simultaneously strength and electrical conductivity of UFG Al-Zr alloys by an appropriate annealing.