Solid-state additive manufacturing (AM) techniques present a safer and more effective route for processing magnesium (Mg) alloys compared to fusion-based processes. In this study, the powder-bed friction stir (PBFS) additive method was employed to develop the AZ31B magnesium alloy in the form of a deposit. To understand the deposit formation mechanism from its powder bed, the deformation behaviour of the material was first examined using various shoulder-end featured friction stir tools, such as plain (PST), circular (CPF), and spiral-protrusion (SPF). Then, to investigate the through-thickness attributes; porosity, mechanical properties (tensile strength and hardness), and residual stress, of the optimal deposit along the build direction (bottom, middle, and top regions) were analyzed. Among various shoulder-end features, the CPF tool with a 0.5   mm protrusion height yielded a 10   mm thick sound deposit by enhancing inter-layer and intra-layer material mixing. The PBFS process produced a highly dense deposit (porosity ~0.04–0.06%) with maximum and minimum ultimate tensile strength (UTS) of approximately 245±15.1   MPa and 210±6.5   MPa, respectively, across the layers. While the maximum and minimum tensile residual stress were found to be 29.12±3.9   MPa and 21.32±5   MPa, respectively. The obtained strength primarily resulted from the refined microstructure (grain size ~2.54±1.11 μm), which was attributed to dynamic recrystallization. A slight through-thickness variation in the UTS was attributed to a modest microstructural gradient across the layers, developed during multi-stage thermal cycles, as recorded by an indigenous temperature-monitoring system. Similarly, a minor through-thickness variation of porosity and residual stress was attributed to the thermal histories experienced by the respective layers.