The influence of dual-heterostructure of grain size and precipitates on the mechanical properties of the AZ91 alloy extruded sheet prepared by small extrusion ratio was investigated. Compared to the sample with the extrusion ratio (ER) of 12.8 (i.e., ER12.8 sample), the ER3.9 and ER6.4 samples present a remarkable coarse and fine-grained layers with heterogeneous fine-dispersed precipitates. Moreover, a large number of banded precipitates are observed in the fine-grained layers of the ER3.9 sample. The ER6.4 sample has an excellent combination of strength and ductility due to a balance of heterogeneous deformation-induced (HDI) stress and precipitates. Although the ER3.9 sample shows the highest HDI stress and Schmid factor for basal slip to improve ductility, more banded precipitates still play a dominate role in deteriorating its mechanical properties.