<p>A coaxial ultrasonic-assisted friction stir welding (UAFSW) method was developed in this study to overcome the limitations of conventional non-coaxial systems, such as bulky actuators, poor welding accessibility, and difficulties in joining complex curved surfaces. Using this system, the effects of ultrasonic vibration on the peak temperature, microstructure, and mechanical properties of welded joints were systematically investigated. At 800&#xa0;rpm, the peak temperature in the weld nugget during UAFSW decreased by approximately 24.8&#xa0;°C compared with FSW, owing to enhanced material flow and localized softening induced by ultrasonic vibration, which facilitated more efficient heat dissipation. In addition, the automatic frequency-tracking function and coaxial design of the developed system ensured effective transfer of ultrasonic energy to the weld zone. Compared with conventional FSW, UAFSW reduced the average grain size in the nugget zone by 6.7%, increased the number of the strengthening T₁ (Al₂CuLi) phase, and improved joint tensile strength by 5.1% at 800&#xa0;rpm. Microstructural analyses revealed that the performance improvement mainly originated from the increased strain energy introduced by ultrasonic excitation, which elevated dislocation density, promoted discontinuous dynamic recrystallization, and refined grains. Moreover, ultrasonic excitation enhanced dislocation bending, thereby accelerating elemental diffusion near dislocations and facilitating the nucleation and growth of T₁ at the expense of θ^′(Al₂Cu) and δ^′ (Al₂Li) phases. Although grain refinement also contributed to strengthening, the analysis indicated that T₁ precipitation played the dominant role in the 2195-T8 alloy UAFSW joints. Overall, this work not only validated the effectiveness of the newly developed coaxial UAFSW system but also provided mechanistic insights into how ultrasonic excitation optimized microstructure and enhanced the mechanical performance of Al-Li alloy joints.</p>