Properly designed precoders can significantly improve the spectral efficiency of multiple-input multiple-output (MIMO) relay systems. In this paper, we investigate joint source and relay precoding design based on the mean-square-error (MSE) criterion in MIMO two-way relay systems, where two multiantenna source nodes exchange information via a multiantenna amplify-and-forward relay node. This problem is non-convex and its optimal solution remains unsolved. Aiming to find an efficient way to solve the problem, we first decouple the primal problem into three tractable subproblems, and then propose an iterative precoding design algorithm based on alternating optimization. The solution to each subproblem is optimal and unique, thus the convergence of the iterative algorithm is guaranteed. Second, we propose a structured precoding design to lower the computational complexity. The proposed precoding structure is able to parallelize the channels in the multiple access (MAC) phase and broadcast (BC) phase. It thus reduces the precoding design to a simple power allocation problem. Last, for the special case where only a single data stream is transmitted from each source node, we present a source-antenna-selection (SAS)-based precoding design algorithm. This algorithm selects only one antenna for transmission from each source and thus requires lower signalling overhead. Comprehensive simulation is conducted to evaluate the effectiveness of all the proposed precoding designs.