Abstract In magnesium alloy sheet products have been attracting more and more attention in recent years because of their application potentials as coverings of portable electrical devices and automotive panels. However, magnesium alloy sheets are usually formed at temperatures between 250 and 400 °C because of their poor plasticity at room temperature, which makes the tooling system quite complex and also the products cost expensive. A proper forming temperature range was determined. The effects of blank holding forces on the workpiece quality were analyzed by warm deep drawing of cups from magnesium alloy sheets. Therefore, appropriate process parameters were selected to avoid forming defects effectively. In the paper, a rigid blank holder was used to adjust blank holding forces. A special liquid lubricant PTFE was used on the tool surfaces. The conditions of process defects as flange wrinkling and ruptures were analyzed. Experiments were carried out to verify the computer simulation results. Efforts were made to optimize process parameters by analyzing the causes of defects in order to improve the Limit Drawing Ratio of magnesium alloy workpieces. Computer simulation with explicit finite element method was used to optimize the process parameters before carrying out the actual experiments. It is found that rolled magnesium alloy sheets have good deep drawing formability at a forming temperature range of 105–170 °C with the limit drawing ratio up to 2.6. It is also necessary to control the time of heating blanks. The formability will be reduced severely by excessive heating duration.