Strain heterogeneity at the microstructural level plays a vital role in the deformation and fracture behaviour of dual or multi-phase materials. In the present work, the strain heterogeneity, localization and partitioning arising at the sub-micron scale during elevated temperature (170 °C) tensile deformation of an Mg-5Al-3Ca alloy was investigated using quasi in-situ μ-DIC experiments. The results reveal that the strain is mainly carried by the α-Mg phase, while the intermetallic Laves phase plays a critical role in that strain concentrations build up at the α-Mg matrix and Laves phase interfaces, hence, reducing the overall deformability of the alloy. In quasi in-situ and bulk material analysis at elevated temperature, cracks were observed to nucleate in the Laves phase, at i) the intersection points of slip lines in the α-Mg matrix with the Laves phase and ii) the twin intersections with α-Mg/Laves phase interfaces and iii) twin transmissions across α-Mg/Laves phase interfaces. Euler number analysis has shown that the (inter-)connectivity of the Laves phase decreases with deformation. Finally, cracks grow preferentially along the Laves phases until the material fractures.