The grain boundary sliding and the formation of slipped bands and cavitations during biaxial tensile deformation were examined in fine grained Al-Mg alloy. Biaxial tensile testing was conducted with cruciform specimens at initial strain rates of 10-4 to 101s-1. It was found that at the same equivalent strain conditions, the number of cavities under biaxial tension is significantly greater than that under uniaxial tension. A greater prevalence of slipped bands and grain separations were clearly observed under biaxial stress than under uniaxial stress. It was suggested that development of slipped bands resulted from the formation of elongated cavities and multiple deformed bands under biaxial stress. Additionally, the m-value under biaxial stress remained at about 0.3 over a wide range of strain rates. The effects of grain separation and formation of cavities were related to the motion of grain boundary sliding, grain size and loading conditions.