Magnesium alloys have received an increasing interest in the past 12 years for potential applications in the automotive, aircraft, aerospace, and electronic industries. Many of these alloys are strong because of solid-state precipitates that are produced by an age-hardening process. Although some strength improvements of existing magnesium alloys have been made and some novel alloys with improved strength have been developed, the strength level that has been achieved so far is still substantially lower than that obtained in counterpart aluminum alloys. Further improvements in the alloy strength require a better understanding of the structure, morphology, orientation of precipitates, effects of precipitate morphology, and orientation on the strengthening and microstructural factors that are important in controlling the nucleation and growth of these precipitates. In this review, precipitation in most precipitation-hardenable magnesium alloys is reviewed, and its relationship with strengthening is examined. It is demonstrated that the precipitation phenomena in these alloys, especially in the very early stage of the precipitation process, are still far from being well understood, and many fundamental issues remain unsolved even after some extensive and concerted efforts made in the past 12 years. The challenges associated with precipitation hardening and age hardening are identified and discussed, and guidelines are outlined for the rational design and development of higher strength, and ultimately ultrahigh strength, magnesium alloys via precipitation hardening.