A high‐strength magnesium‐lithium alloy is successfully fabricated via cold rotary swaging herein. The microstructure evolution in the central and edge regions of the alloy bar during the swaging process is explored using transmission electron microscopy. The results show that nanograins with high‐angle grain boundaries are formed in the central region of the alloy bar after five‐pass swaging, resulting in higher microhardness and strength obtained in the central region than in the edge region. The sample in the central region of the five‐pass swaged alloy bar exhibits a specific strength of 313 kN m kg−1 and a yield strength of 463 MPa. The nanocrystallization process of initial coarse grains in the central region of the alloy bar contains massive twinning first and subsequent refinement of twin/matrix lamellae through the formation of many dislocation arrays. However, it is not possible to form nanograins in the edge region of the alloy bar after five‐pass swaging because of the lower twinning activity and the difficulty of forming dislocation arrays compared with the central region.