In order to research the multi-level structure of Lyocell fiber at different draw ratios and to reveal the limiting factors for preparing the high strength Lyocell fiber, the paper reports on the effect of draw ratio including low drawing (1–5), high drawing (6–11) and excessive drawing (12–20) on the multi-level structure and the mechanical properties of Lyocell fiber. The structure was determined by wide-angle X-ray diffraction, small-angle X-ray scattering and fibrillation test, and the result showed that, at low draw ratio stage, the breaking strength, yield strength and modulus of the fiber increased with the draw ratio owing to crystallinity as well as orientation increased while the micropore decreased, and there are almost no microfibrils on the fiber surface. At high draw ratio stage, the orientation of amorphous region increasing was the principal reason for the increase of fiber mechanical properties, and the micropores continued to decrease and a few short and thick microfibril was formed. At excessive draw ratio stage, the breaking strength remained constant mainly due to the basically unchanged crystallinity and orientation of the fibers, the yield strength and modulus decreased due to the slip of the highly crystallized and oriented elementary fibril. Meanwhile, the micropores still decreased and became much slenderer, the number of microfibrils increased and the microfibrils showed tenuous structure. It could be summarized that Lyocell fiber had the characteristics of multi-level structure, and the fundamental reason limiting the improvement of mechanical properties with draw ratio increase was the slip of elementary fibril.