Abstract: A recently developed healable Al-Mg2Si designed by the programmed damage and repair (PDR) strategy is studied considering the role microstructural defects play on precipitation, damage, and healing. The alloy incorporates sacrificial Mg2Si particles that precipitate after friction stir processing (FSP). They act as damage localization sites and are healable based on the solid-state diffusion of Al-matrix. A combination of different transmission electron microscopy (TEM) imaging techniques enabled the visualization and quantification of various crystallographic defects and the spatial distribution of Mg2Si precipitates. Intragrain nucleation is found to be the dominant mechanism for precipitation during FSP whereas grain boundaries and subgrain boundaries mainly lead to coarsening of the precipitates. The statistical and spatial analyses of the damaged particles have shown particle fracture as the dominant damage mechanism which is strongly dependent on the size and aspect ratio of the particles whereas the damage was not found to depend on the location of the precipitates within the matrix. The damaged particles are associated with dislocations accumulated around them. The interplay of these dislocations is directly visualized during healing based on in situ TEM heating which revealed recovery in the matrix as an operative mechanism during the diffusion healing of the PDR alloy.