Annealing treatment is an effective strategy to enhance the comprehensive properties of Mg-8Li-3Al-2Zn (LAZ832) alloy, where the cooling rate plays a decisive role in tailoring microstructure and performance. This study systematically investigates the effects of cooling rates, controlled via water quenching (WC), air cooling (AC), and furnace cooling (FC), on the phase evolution, mechanical properties, and corrosion resistance of LAZ832. The annealed microstructure consists of α-Mg, β-Li, AlLi, and MgLi2Al phases, and the volume fraction of Al-Li phases (AlLi and MgLi2Al) increases as the cooling rate decreases. Strengthening mechanisms are dominated by solid solution strengthening, driven by the dissolution of Al and Zn atoms into the matrix, which significantly enhances tensile strength. However, excessive solute content leads to a marked decline in ductility. Scanning probe microscope (SPM) reveals an elevated work function due to the dissolution of Al and Zn atoms into the matrix phase, correlating with improved corrosion resistance. Comprehensive analysis demonstrates that air cooling achieves an optimal balance between tensile strength, ductility, and corrosion resistance, outperforming furnace-cooled samples and offering a pragmatic compromise compared to water-quenched specimens with higher strength but brittle failure. These findings establish a robust framework for designing LAZ832 alloys with tailored microstructures and multi-property optimization, advancing their application in lightweight engineering fields.