The novel Mg-RE master alloys have been prepared upon addition of TiC0.5N0.5 nanoparticles (NPs) to the master alloys via ultrasonic assisted cast. The microstructural analysis shows that the primary α-Mg dendrites and RE-rich phases in the matrix of Mg-RE master alloys can be considerably refined when the nanoparticle addition level reaches up to 2 vol%. The nanoparticles with an average size of 48.2 nm are located along the phase boundaries and induce the microstructure refinement of Mg-RE master alloy by growth restriction mechanisms. As-cast Mg-10Gd-3Y-0.2Zr (GW103K) alloy is prepared via mixing and fusing method with the novel Mg-RE master alloys of Mg–25Y and Mg–25Gd adding 2 vol% nanoparticles. During melting and solidification, GW103K alloy could inherit these nanoparticles from Mg-RE master alloys, which leads to a remarkable refinement of α-Mg grains and RE-rich phases of GW103K alloy. The ultimate tensile strength (UTS), yield strength (YS) and elongation (EL) of as-cast GW103K alloy reach 246.7 MPa, 159.3 MPa and 3.94%, which are increased by 32.0%, 18.1% and 116.5%, respectively, compared with the nanoparticle-free GW103K alloys. The present work may provide a practical approach to developing magnesium alloys with high performance.