The effects of different amounts of rare earth Gd added into AZ61 on the microstructure and mechanical properties of magnesium alloys were studied in this paper. And it adopts T6 heat treatment. When 2% Gd has been added, the microstructure of the alloy becomes uniform. The grains are refining. Gd is prior to reacting with Al for forming Al2Gd phase with high melting point. It is in the form of dot-like and globosity along the grain boundary. And β-Mg17A112 phase is reduced and its shape is thinner. The Al2Gd phase hinders dislocation movement. It markedly improves the mechanical properties of the alloy at room temperature and high temperature.