Cytocompatibility and biodegradation behaviour were investigated for a newly developed ultralight Mg-4Li-1Ca (LX41) alloy with different starting microstructures. This established the important role of microstructure in determining the pH variation, H2 evolution and amount of ions (Mg, Li, Ca) released during degradation. Thus, different thermomechanical treatments were utilised to alter the microstructure of the alloy and to evaluate its bio-response. The as-cast and two step rolled+annealed (TA30) materials showed stronger X-ray diffraction peaks for Mg- and Li-containing hydroxyapatite (HA) than the two step rolled (TSR) and the equal channel angular pressed (ECAP) materials. It was also found that the as-cast and TA30 variants of LX41 showed good cell viability of more than 100% with preferential attachment and healthier cell morphology than the TSR material. This is associated with greater content of Mg and Li ions released during alloy degradation. These act as mediators to establish contact between the cells and the substrate, and thereby promote cell attachment and proliferation. These findings suggest the existence of a strong microstructure-cytocompatibility relation for the present LX41 alloy, which can be used as an important tool for further magnesium alloy development for biological applications. © 2016 Walter de Gruyter GmbH, Berlin/Boston.