Magnesium alloys have many unique properties, mostly benefitting from the low density of magnesium. However, they are not competitive, when compared with other lightweight materials, such as aluminum alloys, particularly in ductility and corrosion resistance. There is a strong need to improve the mechanical properties and corrosion resistance of magnesium alloys. In the present research, friction stir processing (FSP) as a severe plastic deformation process was applied to the WE43 magnesium alloy. The effect of FSP up to 6 passes on the grain structure, second-phase particle distribution, mechanical properties and corrosion resistance of the alloy was investigated. It was found that a continuous network of second-phase particles was present at the grain boundaries, which was considered to be one of the main causes for the poor ductility of the alloy in the as-annealed state. By applying two passes of FSP, the grain structure was significantly refined, changing from an average grain size of 12.4 to 2.5 μm. By further FSP, the grain structure continued to refine to an average grain size of 1.4 μm after 4 passes and remained unchanged after 6 passes. However, the fragmentation and redistribution of second-phase particles continued to occur during the 4th and 6th passes of FSP. Because of these microstructural changes, the uniform strain to maximum stress and the strength of specimens gradually improved with increasing number of FSP passes. The corrosion resistance of the alloy was found to be improved by applying 6 passes of FSP, compared to that of the alloy in the initial as-annealed state, which was attributed to the fragmentation and redistribution of second-phase particles. By applying FSP, the uniformity of the protective passive layer was improved and, in the meantime, the intensity of micro-galvanic coupling leading to pitting corrosion was decreased.