The microstructure and mechanical properties of Mg-Y-Zr-xNd alloys with 0–2.63 wt% Nd were investigated using optical microscopy, scanning electron microscopy, transmission electron microscopy, X-ray diffraction and tensile testing test. Results indicated that more Mg24Y5 particles and Mg14Nd2Y (β) phases were dispersed in the matrix when Nd content increased from 0 wt% to 2.63 wt% in the extruded alloys. Consequently, the nucleation of dynamic recrystallization and the volume fraction of recrystallized grains were promoted obviously. The average grain size can be refined in the range of 4.6–1.3 μm after the addition of 2.63 wt% Nd. The tensile strength of extruded alloys increased with increasing Nd content, and elongation exhibited an opposite change tendency. The extruded alloy sheet with 1.01 wt% Nd demonstrates optimal combination of strength and plasticity, i.e., the ultimate tensile strength, yield strength, and elongation were 273 MPa, 214 MPa, and 24.2%, respectively. Variations in mechanical properties are discussed on the basis of microstructure observations.