A homogeneous microstructure of as-cast magnesium alloys is necessary to improve the formability during their subsequent thermomechanical processing. In Al-containing magnesium alloys, the grain refinement by carbon inoculation is considered to be the best approach until now. However, the mechanism of grain refinement is unclear. The present work investigates the coring microstructure in Mg-Al alloys inoculated with carbon using FIB, SEM and TEM techniques. In each grain one or more "hillocks" exist, enriched with carbon, manganese and aluminium. This is possibly related to the inhomogeneous nucleation of alpha-magnesium. The precipitates in these "hillocks" are always surrounded by the aluminium-rich zones. These characteristics of microstructure observed in Mg-Al alloys with carbon inoculation are compared with that observed in Al-free magnesium alloys inoculated by zirconium. The similarities between them are discussed. A novel mechanism is suggested to explain the grain refinement in Mg-Al alloys inoculated by carbon.