A wire brushing and annealing process is developed and utilized to modify the surface layer microstructure of AZ31 magnesium sheet material and assess its effect on uniaxial tensile ductility and bendability. Wire brushing process utilizing fine brass wires is optimized to minimize deterioration in original surface quality by varying spindle rotational speed and depth of cut per wire brushing pass. Wire brushed material is then subjected to annealing to recrystallize the severely deformed surface layer. Rotational speed of 2800 RPM, feed rate of 1 mm/s, and a very small depth of cut coupled with annealing at 200 °C for 60 minutes results in a refined grain layer of grain size 5.5 μm and depth 30 μm on the surface. A texture study of wire brushed and annealed surface by X-ray diffraction reveals a randomized texture on the surface. Refined grain size and randomized texture result in about 38% enhancement in uniaxial tensile elongation in AZ31 compared to non-wire brushed annealed material. The role of surface microstructure and texture in improving sheet tensile ductility and bendability is discussed.