The effect of Nd and Y addition on the microstructure and mechanical properties of as-extruded Mg-Zn-Zr magnesium alloy has been investigated in this study. The Mg-Zn-Zr alloy had 11 μm average grain size due to dynamic recrystallization during hot extrusion; but the average grain sizes of the Mg-Zn-Nd-Y-Zr alloys were markedly reduced to 4 μm by Nd and Y additions. The lamellar α-Mg + T phase or α-Mg + W phase eutectics at grain boundaries in as-cast Mg-Zn-Nd-Y-Zr alloys were broken up and MgZn2 precipitates in the matrix are obtained during hot extrusions. The mechanical properties of as-extruded Mg-Zn-Zr alloy were improved significantly by Nd and Y additions, especially the elevated temperature strength, which was above 150 MPa in ultimate tensile strength at 250 °C. These may be ascribed to the very fine grain size, the dispersed T phase or W phase and the MgZn2 type Laves phase precipitating during hot extrusion.