A nanostructured surface layer with thickness of about 20 µm was formed on commercially pure zirconium using surface mechanical attrition treatment (SMAT). The microstructural features of the surface layer were systematically investigated using optical microscopy (OM), x-ray diffraction (XRD), transmission electron microscopy (TEM) and high-resolution transmission electron microscopy (HRTEM), respectively. Based on the results obtained, a grain refinement mechanism induced by plastic deformation during SMAT of Zr is proposed. At the initial stage of SMAT, twinning dominates the plastic deformation of Zr and divides the coarse grains of Zr into finer twin plates. With increasing strain, intersection of twins occurs, and dislocation slips are activated, becoming the predominant deformation mode instead of twinning. As a result of the dislocation slips, high-density dislocation arrays are formed, which further subdivide the twin plates into subgrains of size about 200-400 nm. With a further increase of strain, the dislocations accumulate and rearrange to minimize the energy state of the high-strain-energy subgrains, the dense dislocation walls convert to grain boundaries, and the submicronic grains are subdivided, leading to the formation of nanosized grains at the top of the treated surface.