A study has been performed on an Al–7Mg–2Cr (wt-%) rapidly solidified alloy as a candidate for engineering applications requiring low density and high strength. The objective of the work was to investigate the development of microstructure during extrusion with respect to the consolidation conditions used and this was achieved by employing a combination of X-ray diffraction, transmission electron microscopy, and differential scanning calorimetry. The rapidly solidified powder was found to be cellular in structure with drastic segregation of magnesium during solidification, which resulted in a heterogeneous distribution of magnesium rich intermetallics in the as atomised condition. However, it was observed that the atomisation process had successfully prevented the formation of coarse chromium containing intermetallics. Owing to the stability of a ternary chromium containing phase at the lower consolidation temperatures used (<450°C), the heterogeneous nature of the powder led to a heterogeneous distribution of intermetallics in the consolidated product. It was found that when high consolidation temperatures were employed (>450°C) the severity of this inhomogeneity was reduced and the desired homogeneous distribution of chromium rich intermetallics in a magnesium rich solid solution was produced. The mean dispersoid diameter increased with extrusion temperature, as did the volume fraction of dispersoids, this being a result of the rapid increase in the diffusivity of chromium in aluminium over the temperature range employed for consolidation. Owing to a high dispersoid density, the substructure formed by dynamic recovery during deformation was refined, with the extruded material exhibiting subgrains of the order 0·4–1·0 μm mean diameter. The consolidation temperature that yielded the optimum microstructure was found to be 500°C.