Mg alloy has poor ductility and formability at room temperature because of lack of the active slip systems. Recently, it has been reported that the grain refinement improves its ductility, thus it would be expected that friction stir processing (FSP) enhances the formability of Mg alloys because FSP can create homogeneous microstructure consisting of fine grains. However, FSP leads to not only the grain refinement, but also the strong accumulation of crystallographic texture in Mg alloy. It is likely that the texture formed during FSP also affects the formability significantly in Mg alloy, but effect of texture on formability in FSPed Mg alloy has not been examined yet. In this study, FSP was applied to AZ31B Mg alloy at several FSP parameters and the stir zones having the different microstructural features were obtained. Effect of microstructure, especially grain size and texture, on fracture limit major strain under the uniaxial tension was examined in the stir zone of the FSPed AZ31B Mg alloy, and the microstructural features for the formability enhancement in Mg alloy were proposed.