Precipitation hardened magnesium-rare earth alloys offer attractive properties for the aerospace and racing automotive industries. The most successful magnesium alloys developed to date have been those based on the Mg-Y-Nd system identified as WE54 (Mg-5.0wt%Y-4.1wt%RE-0.5wt%Zr) and WE43 (Mg-4.0wt%Y-3.3wt%RE-0.5wt%Zr), where RE represents neodymium-rich rare earth elements. Precipitations sequence in WE-system alloys involved the formation of phases designated β”, β’, β1 and β depending on the ageing temperature. WE54 alloy with the equilibrium β-phase exhibits good ductility and medium tensile strength. The β phase precipitated in Mg-Y-Nd alloy during ageing at 300 °C was studied using X-ray diffraction analysis and transmission electron microscopy. Precipitation at 300 °C for one hour causes formation of the equilibrium β phase. This phase has an f.c.c. structure (a = 2.2 nm), which makes it isomorphous with Mg5Gd. With the prolonged ageing time at 300 °C, the volume fraction of the β phase increases and lattice parameter of the solid solution of α-magnesium decreases.