Large plastic deformation through cold-rolling refines microstructure through the accumulation of plastic strains over multiple stages. Machining achieves similar large plastic strains (1–10) in a single stage to produce ultra-fine-grained chips. Effect of cold-rolling and machining on microstructure and mechanical properties of Al6061 was investigated. As-received, solution heat-treated, and peak-aged plates were cold-rolled to 30, 50, and 70% thickness reductions. Ultra-fine-grained chips were produced from low-speed orthogonal-machining under plane-strain condition, using a restricted contact tool to minimize the chip curvature. Grains were equiaxed in as-received, solution heat-treated, and peak-aged bulk samples, while they were elongated in cold-rolled bulk. In chips, grains were elongated in one direction due to severe plastic flow. Hardness and ultimate tensile strength increased with thickness reduction. Chip hardness is 60% more than as-received material due to microstructure refinement. Metal cutting (single-stage process) and thickness reduction greater than 50% by cold-rolling (multi-stage) provide nearly the same enhancement in mechanical properties (40% more than bulk).