Magnesium alloys are very attractive in such applications as automotive and aerospace. However, the mechanical properties of Mg alloys are inferior to those of Al alloys, and this limits their range of applications. In the present study, effects of annealing on the mechanical properties and the thermal stability of the microstructure in LPSO Mg-Zn-Y extruded alloys were investigated. Even when elongation showed 10% with having maintained high strength to annealing temperature at 573 K for 3.6 ks, and this alloy extended annealing time for 1.0 kh, LPSO phase did bent and was able to confirm kink bands. On the other hand, α-Mg phase was fine structure without pronounced grain growth. In elevated temperature deformation of as extruded and annealed materials, LPSO phase did finely dispersed to α-Mg phase by grain boundary sliding of α-Mg phase, but fracture did not occurred in the interface between LPSO and α-Mg phases. Kink bands introduced in LPSO phase during plastic deformation and fine-grained α-Mg phase were important to obtained of high strength and ductility.