A two-step overaging treatment was exploited in thermomechanical processing for producing fine grained Al–Mg–Li alloy sheets. The effects of each step and temperatures of overaging on the distribution of precipitates and recrystallised grain structure were investigated. The influence of preheating treatment before rolling on precipitate coarsening or dissolution was also considered. The results showed that, in contrast to rod shaped precipitates produced by single overaging at 300°C, precipitates produced by a two-step overaging tended to have globular morphologies. The globular precipitates were not deformed during the following large rolling reductions. Overaging at 200°C for 24 h then at 300°C for 24 h resulted in a distribution of globular precipitates with sizes of 1·0–1·2 μm. Preheating at 400°C or raising the overaging temperatures of each step to 300 and 400°C led to a reduction in the precipitate size. Subsequent rolling and recrystallisation resulted in a fine grain structure with an average grain diameter of approximately 8·1 μm for 200°C/24 h+300°C/24 h and 9·2 μm for 300°C/24 h+400°C/24 h overaging treated material respectively in the surface layers of the sheet.