The paper presents results of TEM investigations of Elektron 21 magnesium alloy in as cast condition and after heat treatment. The compositions of the Elektron 21 alloy used in the present study was Mg-2,7%wtNd-1,2%wtGd-0,47%wtZr. Solution heat treatment was performed at 520°C/8 h/water. Ageing treatments were performed at 200°C/4÷96h and 300°C/48h with cooling in air. The as-cast microstructure and microstructural evolution during heat treatment were examined by transmission electron microscopy. Samples were prepared using Gatan PIPS ion mill. Examinations were performed in a JEM 2010 ARP microscope. The microstructure of the cast alloy consists of a-Mg phase matrix with precipitates of Mg12(Ndx,Gd1-x) phase at grain boundaries. After solution treatment the Mg12(Ndx,Gd1-x) phase dissolved in the matrix. The ageing treatment applied after solution treatment with air-cooling caused precipitation of a β’ and β phases.