In this study, the effects of annealing on the interfacial microstructure, mechanical properties and residual stress of explosively welded AZ80 magnesium alloy and A6005C aluminum alloy cladding plate were investigated. After explosive welding, thin interlayer composed by intermetallic compound, i.e., γ-Mg₁₇Al₁₂ phase, was formed at the interface of the cladding plate. After annealing at both 373 K and 473 K, the thickness of the interlayer increased. With annealing at 473 K, the interlayer changed from a one-layer structure consisting of γ-Mg₁₇Al₁₂ phase to a two-layer structure consisting of γ-Mg₁₇Al₁₂ phas and β-Al₃Mg₂ phase, resulting in the decrease in shear strength. As a result of nanoindentation measurement at the interface, the hardness was remarkably large in the β-Al₃Mg₂ phase. It was suggested that this phase became the crack initiation site for brittle fracture and the shear strength decreased. Measurements of the residual stress using synchrotron radiation X-rays at the interface of cladding plate revealed the tendency of the generation of tensile residual stress on AZ80 magnesium alloy side and compressive residual stress on A6005C aluminum alloy side. After annealing at 473 K, residual stresses in AZ80 magnesium alloy side and A6005C aluminum alloy side changed to compressive and tensile stress, respectively, and the stress values became smaller in both cases. On the other hands, after annealing at 373 K, compressive residual stress was observed in both AZ80 magnesium alloy side and A6005C aluminum alloy side.