The present work evaluates the segregation of alloying elements during severe plastic deformation of a magnesium alloy. A Mg-1wt% Mn-1wt% Nd alloy was processed by high-pressure torsion and the microstructure was characterized by X-ray diffraction, scanning and transmission electron microscopy. High angular annular dark-field images were used to distinguish areas with segregated alloying elements. The results show that Nd readily segregates along boundaries in the early stage of deformation while Mn, which was dispersed as small particles in the starting material, undergoes slow fragmentation forming nanoparticles distributed throughout the microstructure and segregates along boundaries. The evolution of microhardness shows a rapid increase in strength at low imposed strains and saturates. It is suggested that Mn plays only a minor role in the contribution to the strength of this alloy because the slow development of nano-clusters and segregations of this element is not accompanied by changes in hardness.