The invention relates to a microstructure refining method for improving the room-temperature plasticity of magnesium alloy and belongs to the technical field of alloy microstructure refining. According to the method, aiming at the problem that the plasticity is relatively poor due to the fact that structures, such as a first-born W phase or/and a first-born I phase, of an Mg-Zn-Er alloy are coarse and large and are difficultly dissolved, 0.01-1.0wt.% Al is added into the alloy as a structure refining element, so that the organizational structure of the alloy can be remarkably refined, the size of a first-born second phase is about 10-50 microns, and after solid solution treatment, first-born phases disappear and are replaced with a needle-like second phase which has the width of about 5-10 microns and the length of about 15-35 microns and is of distribution and dispersion; after extrusion processing, the elongation percentage of the alloy at room temperature can reach 25-45%, so that the plasticity performance of the magnesium alloy material is excellent.