Abstract. Magnetized target fusion (MTF) is based on the quasi-adiabatic compression of a dense magnetized plasma by an imploding liner. Plasma beta in MTF systems is sometimes much greater than 1, and the plasma may be in direct contact with the imploding liner. Plasma processes are strongly dominated by inter-particle collisions. Under such conditions, the plasma microturbulence, behavior of alpha particles, and plasma equilibria are very different from conventional fusion systems. The present paper contains the most comprehensive analysis of the corresponding phenomena to date. We also formulate limitations on fusion performance of MTF systems arising from the magnetic field penetration into the liner, from the mix of the liner material with the compressed plasma, and from edge radiation losses. 2D numerical simulations of plasma convection in the targets of a diffuse pinch type establish operational limits for this type of targets. This work was supported by U.S. Department of Energy.