To clarify the forming limit of magnesium alloy in cold forging, workability of magnesium alloy is examined for upsetting and backward extrusion. In the upsettability test, sudden fracture by crack propagation occurs at a small equivalent strain of about 0.15. On the other hand, in cold backward extrusion with a conical punch, the local strain can reach a very large value, 3.0 or greater, without fracture. To explain the experimental results, the mechanism of fracturing is discussed on the basis of strain localization, and a fracture criterion of magnesium alloy in cold forging is put forward.