A large reduction rolling process was used to obtain complete dynamic recrystallization (DRX) microstructures with fine recrystallization grains. Based on the hyperbolic sinusoidal equation that included an Arrhenius term, a constitutive model of flow stress was established for the unidirectional solidification sheet of AZ31 magnesium alloy. Furthermore, discretized by the cellular automata (CA) method, a real-time nucleation equation coupled flow stress was developed for the numerical simulation of the microstructural evolution during DRX. The stress and strain results of finite element analysis were inducted to CA simulation to bridge the macroscopic rolling process analysis with the microscopic DRX activities. Considering that the nucleation of recrystallization may occur at the grain and R-grain boundary, the DRX processes under different deformation conditions were simulated. The evolution of microstructure, percentages of DRX, and sizes of recrystallization grains were discussed in detail. Results of DRX simulation were compared with those from electron backscatter diffraction analysis, and the simulated microstructure was in good agreement with the actual pattern obtained using experiment analysis. The simulation technique provides a flexible way for predicting the morphological variations of DRX microstructure accompanied with plastic deformation on a hot-rolled sheet.