The role of GB in Mg-substituted lanthanum-strontium manganite ceramics is studied with microstructural details. At higher concentrations of Mg (x > 0.05), where the average grain size is similar to1 mum, the M-I transition is shifted from 348 to 110 K. Annealing in lower p(O2) (10(-6) atm) at 1375 K for I h obliterates the M-I transition and brings in insulating behaviour throughout the temperature of measurement. Re-annealing in oxygen atmosphere for 1025 min reintroduces the M-I transition, indicating that the electrical transport properties depend on the chemical inhomogeneity introduced by the in- or out-diffusion of oxygen through the GB regions. Samples with larger grain size (similar to35 mum) do not exhibit major modifications in electrical resistivity on annealing in different p(O2). The insulating manganites display non-linear J-E characteristics below the magnetic transition temperature at electric field strengths <50 V/cm. The non-linear behaviour is explained on the basis of the inelastic tunnelling through the multiple localised states in the insulating GB regions. The external magnetic field lowers the voltage at which the non-linearity sets in. The tunnelling therefore may be not only through independent defect centres of oxygen vacancies (V-O). but possibly from defect complexes such as Mn3+-V-O or Mn2+-V-O, where spin-dependent tunnelling can take place.