The TEM observation was performed to investigate the precipitation hardening in Mg-Gd-Zr alloy. Both the β’ and the β” phase coexist in the specimen aged at 473K for 16h. In the specimen aged at 523K, the β’ phase which has base centered orthorhombic (bco) structure was observed at early stage during aging. The β’ phase has a globular shape and four atomic layer periodicity in the Mg. The β’ phase grew with increasing aging time mainly along the Mg and the Mg.