Severe plastic deformation techniques, such as high-pressure torsion (HPT), have been increasingly applied on powder materials to consolidate bulk nanostructured materials. In this context, the aim of the present study is to compare the plastic deformation characteristics during HPT of two distinct Mg-based powder precursors: (i) atomized micro-sized powder and (ii) condensed and passivated nanopowder. Dynamic recrystallization could take place during HPT consolidation of the atomized powder particles while the oxide pinning of the grain boundaries restricted it for the condensed powder. Consequently, there have been substantial differences in the development of the microstructure, texture, local strain heterogeneities, and hardness in the two types of consolidated products. Different types of local strain heterogeneities were also revealed in the consolidated products. The associated diversity in microstructure within the same consolidated product has been demonstrated to have an effect on the hydrogen activation kinetics to form hydrides for these Mg-based materials that could be suitable for solid state H-storage applications.