Hybrid alkali-activated cement (HAAC) has become known as a new alternative cementitious material for Portland cement in recent years due to its excellent mechanical properties and low carbon emissions. However, rapid setting is a critical issue that restricts application of HAAC, especially at high alkali dosage. In this study, the industrial by-product gypsum is used to retard the setting of a typical HAAC that consists of 75 wt% slag and 25 wt % Portland cement, with addition of 5 wt% (relative to cementitious materials) alkaline activator. The influence of gypsum on hydration products and microstructure are investigated to explore the retarding mechanism. Both the initial and final setting time of HAAC are prolonged with the increase of gypsum dosage and reach their maximum when the dosage is 20 wt%. X-ray diffraction and thermogravimetric analysis show that monosulfate and thaumasite are formed, rather than ettringite. The incorporation of a large quantify of gypsum leads to the reduction of hydration products and a loose microstructure. The retarding effect of gypsum is considered to be the declined ion dissolution rate caused by chemical reaction instead of traditional coverage theory in conventional Portland cement.