AZ31 magnesium alloy was welded by friction welding and the effect of post weld heat treatment on microstructures and mechanical properties were investigated. Fine grained microstructure whose minimum grain size is approximately 1 mm was formed at the weld interface by dynamic recrystallization due to hot-heavy working. Although abnormal grain growth which is often found in stir zone in friction stir welding occurred near weld interface where the material was work hardened, the area was limited and did not affect the mechanical properties of weld interface. The tensile and fatigue strength of as weld joints were equal to those of base metal and did not decrease until grain size increased to approximately 15 mm. The decrease in the Hall-Petch slope was found when the grain size decreased less than 3 mm in grain size in terms of yield stress.