Intensive shearing was applied to AZ91D Mg-alloy melts at temperatures above its liquidus (600oC) by using a twin-screw mechanism. The sheared melt was then cast into a TP1 mould (Aluminium Association’s standard test mould with 3.5K/s cooling rate) for microstructural examination. Alloy melts, both with and without shearing, were also filtered using a pressurized filtration technique to collect oxides and other second phase particles. The experimental results showed a significant grain refinement of AZ91D alloy through enhancement of heterogeneous nucleation. Based on the experimental results, a multi-step heterogeneous nucleation mechanism has been proposed: (1) intensive melt shearing converts oxide films and clusters into fine and well-dispersed particles with a narrow size distribution; (2) the dispersed oxide particles act as potent sites for nucleation of Al8Mn5 intermetallic particles; (3) during the further cooling, Al8Mn5 intermetallic particles nucleate the -Mg phase, resulting in a fine and uniform microstructure. The proposed multi-step nucleation mechanism will be discussed in terms of the effect of forced wetting, particle size and particle size distribution on the enhancement of heterogeneous nucleation.