The effect of annealing and secondary rolling process has been investigated in relation to evolution of interface microstructure as well as interfacial bonding mechanisms of roll-bonded two-ply Mg/Al clad sheets in this study. Two types of thin reaction layers, viz., γ (Mg17Al12) and β (Mg2Al3) phase layers, were observed to form along the Mg/Al interface, the thickness of which was found to increase with annealing time. The grains in the γ layer were grown coarsely in a columnar shape, as they grew continuously in coarse-grained Mg substrate alloy side. The thickness of the γ layer was found to reduce significantly after the secondary one-pass rolling. At the same time, the initially columnar γ grains became refined into equi-axed grains by recrystallization caused by large plastic deformation during the secondary rolling. The serrated flow observed in the reaction layers during a nano-indentation test in the γ layer disappeared completely without any sign of micro-cracks after the secondary rolling. This in turn implies that the γ layer, acted as an embrittlement site before the rolling, may not be brittle any longer after the rolling. The grain refinement and disappearance of columnar grains in the γ layer appear to greatly improve the interfacial bonding strength in these clad sheets. This secondary rolling process seems to provide a great advantage in terms of manufacturing, since the same rolling stand for roll-bonding process can also be used without any additional equipment.