Mg-3Al-1Zn (AZ31) alloy was caliber rolled isothermally at the temperature of 300 °C to develop fine grains of 3.6 μm. Annealing was carried out at various times and temperatures. Along with microstructure, annealing affects the hardness and hardness penetration depth. The hardness penetration depth of caliber rolled bar during annealing at 300 to 450 °C was investigated for 5 to 60 minutes. The change in hardness penetration depth were analysed and the mechanisms involved were discussed. © (2015) Trans Tech Publications, Switzerland.