The microstructure of deformation-processed metal-metal composites (DMMC) of Mg-Li alloys containing steel reinforcing fibers was characterized to correlate the fiber size to the deformation strain and mechanical properties of the composite material. Micrographs taken using scanning and transmission electron microscopy techniques revealed fiber sizes larger than predicted from the deformation applied to the bulk composite. Deformation strain in the fibers, therefore, was less than in the bulk material. Measurements from SEM and TEM micrographs were used to calculate the actual deformation strain present in the fibers. This strain was then used to adjust rule-of-mixture (ROM) predictions of the strength of the composite material. However, the experimental strengths of these materials were still less than the adjusted ROM values, potentially due to the presence of fibers considerably larger than the average size measured stereologically. Of the many models used to describe the strengthening observed in DMMC materials, the Hall-Petch relationship best describes the experimental data. Details of the strengthening models are discussed in relation to these composite materials.