Friction stir processing is applied for property improvement of cast alloys for last two decades and many developmental studies were carried out in this topic on various alloys. In the current work, friction stir processing was carried out on rare earth containing magnesium alloy AE42. This alloy was specially developed for automobile application as it has better creep resistance than commercial magnesium alloys. Multi-pass Friction Stir Processing was carried out with varying the distance between passes from 0.5 mm to 2.5 mm using 12 mm shoulder diameter tool. Pin was with conical (tapered) and flat configurations with 3 mm height. After processing, the resultant mechanical and metallurgical properties were evaluated. Microstructure was refined to 5 micron and the secondary phases were made in to tiny pieces of 0.5-1 micron and evenly distributed in the matrix. Continuous network of grain boundary which is reason for poor mechanical properties was eliminated. Mechanical properties were improved by 30%. The variation of mechanical properties of processed material with respect to variation of distance between passes was negligible from 1 mm to 1.5 mm for flat pin tool. © (2012) Trans Tech Publications, Switzerland.