Thermal stability of microstructure of the magnesium alloy Mg-2%Sr processed by high pressure torsion has been studied using scanning and transmission electron microscopy. It was shown that formation of bimodal structure after additional annealing at a temperature of 200°C leads to demonstration of enhanced ultimate tensile strength (245 MPa) with a ductility of 1.5%. In addition a uniform distribution of eutectic phase in bimodal structure led to a slowing down of the corrosion rate to 2% for 31 days (compared to the initial state of 78% for the same period).