Effects of annealing temperature on the microstructure and mechanical properties of cold-rolled LZ91 alloy are investigated. The results indicate that LZ91 alloy is composed of α-Mg, β-Li, MgLiZn and MgLi2Zn phases. The recrystallization of the cold-rolled alloy is completed when annealing at 125°C and a large number of fine equiaxed grains with an average grain size of 3 µm is formed. The cold-rolled LZ91 alloys annealed at 125°C have the optimized comprehensive mechanical properties with the elongation, ultimate tensile strength and microhardness of 56.1%, 157 MPa and 51.2 HV, respectively. With the further increase in annealing temperature, the grain size begins to coarsen, which leads to the decrease in strength and ductility of the alloy.