<p>The application of magnesium alloys is restricted by the challenge of enhancing strength and ductility simultaneously. In this work, a corrugated rolling strategy combined with subsequent annealing is adopted to overcome this limitation in AZ31 magnesium alloy. Strain distribution was quantified using digital image correlation (DIC), while microstructural features were characterized by electron backscatter diffraction. DIC results show that, before annealing, deformation initiates in the trough and lower transition zones, accompanied by pronounced localized strain on the corrugated side. After annealing, deformation begins in the upper transition and trough zones, where localized strain also concentrates on the corrugated side, and the elongation increases by 197%. Microstructural analysis indicates that static recrystallization refines grains and eliminates shear bands, improving crack propagation resistance and mitigating stress concentration. The corrugated side and middle layer exhibit higher average KAM values, while the flat side shows a lower proportion of basal slip systems with high Schmid factors and a higher proportion of low-angle misorientations. Consequently, during tensile loading, the corrugated side and middle layer deform first and develop localized strain, whereas the flat side deforms more uniformly. Overall, annealing improves the strain distribution of corrugation-rolled sheets, eliminates shear bands, and adjusts misorientation angle. It also promotes the formation of a millimeter-scale embedded structure, which markedly enhances the ductility of the material. The combined process of corrugation rolling followed by annealing enables a simultaneous increase in both strength and ductility.</p>