Mg alloy has a poor formability at room temperature because of lack of the active slip systems, but the grain refinement improves its ductility. Friction stir processing (FSP) can create homogeneous microstructure consisting of fine grains in Mg alloys, thus it would be expected that FSP enhances the formability of Mg alloys. In this study, multi-pass FSP was applied to Mg alloy AZ31B, and then formability of FSPed alloy was evaluated. Multi-pass FSP produced the fine recrystallized grains in Mg alloy. The stir zone exhibited larger fracture limit major strains than the base material under uniaxial tension and plane strain deformation, and these values increased with decreasing grain size. The stir zone having grain size of 2.9 μm showed the fracture limit major strains which are roughly as same as those of an annealed pure Al. The present study suggests that FSP is an effective method to enhance the formability of Mg alloys.