Based on continuous casting and extrusion (CAXTEX) process, a semisolid metal forming process, continuous rheo-extrusion of magnesium alloy, was proposed. Effect of casting temperature on semisolid region distribution, microstructure formation and stability of forming process, as well as microstructure and mechanical properties of the AZ31 alloy fabricated by the process were investigated. Microstructure evolution from dendrite to rosette or spherical grains was observed with the application of large shearing force provided by the roll. The results indicate that semisolid region in the roll-shoe gap moves downward gradually with the increase of casting temperature, and proper casting temperature range of 730~750°C is suggested. Under the suggested casting temperature, 10×15mm sectional bar of AZ31 alloy with smooth surface and homogeneous striped microstructure has been obtained. As the product was aged for 14h at 180°C after 16h solution at 415°C, the ultimate tensile strength and elongation could reach 305MPa and 11.5%, respectively.