In this work, Mg-3Y sheet was prepared by high temperature cross-rolling and subsequent short-term annealing. The effect of annealing on microstructure, texture, mechanical properties, and stretch formability of Mg-3Y sheet was primarily investigated. Micro-nano size coexistence of β-Mg24Y5 phases can be well deformed with matrix. The as-rolled Mg-3Y sheet exhibited a homogeneous deformation microstructure consisting of deformed grains with extensive kink bands and dispersed β-Mg24Y5 phases. A double peak texture character appeared in as-rolled Mg-3Y sheet with a split of the texture peaks of about ±20° tilted to rolling direction. After annealing, the as-annealed Mg-3Y sheet presented complete static recrystallized (SRXed) microstructure consisting of uniform equiaxed grains. The texture orientation distribution was more dispersed and a weakened multiple-peak texture orientation distribution appeared. In addition, the maximum intensity of basal plane decreased from 5.2 to 3.1. The change of texture character was attributed to static recrystallization (SRX) induced by kink bands and grain boundaries. The as-annealed Mg-3Y sheet with high Schmid factor (SF) for basal <a> slip, prismatic <a> slip, pyramidal <a> slip, and pyramidal <c+a> slip exhibited high ductility (~25.6%). Simultaneously, enhanced activity of basal <a> slip and randomized grain orientation played a significant role in decreasing anisotropy for the as-annealed Mg-3Y sheet, which contributed to the formation of high stretch formability (~6.2 mm) at room temperature.