In this paper, in situ electron back scattered diffraction combined with scanning electron microscopy and digital image processing techniques were used to study the microscopic deformation compatibility of AZ31 Mg alloy rolled sheets with strong basal texture during biaxial tension at room temperature. The results firstly quantitatively showed that the distribution of microscopic strain in AZ31 rolled sheet was inhomogeneous during formation. Strain concentrations happened in some regions even at early stage of deformation. Short distorted bands also appeared in these regions and extended to connect each other with increasing macroscopic strain. The appearance of distorted bands play an important role in strain compatibility since the materials lack easy deformation modes at room temperature. Besides slips and twins, the grain distortion should also be an indispensable mechanism in accommodating plastic deformation in some parts in distorted bands. According to the analysis from the Schmid factor, the geometric compatibility factors and slip trace identification, the comprehensive effect of strong basal texture and biaxial tensile stress state not only led to the quite low SFs for prismatic <a>, pyramidal <a> slips and tensile twinning, but limited the compatibility between slip systems and tensile twins. This mechanism was the main reason for the lack of easy deformation modes and the appearance of distorted bands, which further led to the inhomogeneous strain distribution at room temperature. Therefore, the formability of Mg alloys rolled sheets with strong basal texture was weakened at room temperature.