The paper studies the effect of high pressure torsion on the microstructure, mechanical properties and electrical conductivity of Al-0.53Mg-0.27Zr (wt.%) alloy preliminarily aged at Т = 375 ^оС for 366 h. The aging leads to the formation of nanoscale precipitates of Al₃Zr (Ll₂) phase with the average size of 15 nm. As a result of HPT processing, ultrafine-grained (UFG) structure with the average grain size of 400 nm was formed, the size and amount of Al₃Zr precipitates decreased. The HPT processing leads to a remarkable increase of strength to 465 MPa with keeping a good level of electrical conductivity ∼51.5% IACS and acceptable ductility (>3%). The hardening contributions from different microstructural features including grain boundaries, dislocations and solute alloying elements (Zr, Mg) and second phase precipitates were quantitatively calculated on the basis of the obtained microstructural parameters in the UFG Al–Mg–Zr alloy and compared with the similar contributions in the UFG low-doped Al-0. Zr alloy. It was shown that the colossal increase in strength of UFG Al–Mg–Zr alloy could not be explained only by traditional hardening mechanisms. The key role of remarkable strengthening belongs to Mg alloying: Mg not only promotes grain refinement, but also causes additional unusual substantial strengthening (≥150 MPa), which even exceeds grain boundary strengthening (Hall-Petch strengthening). Possible reasons of this additional strengthening are discussed.