Microstructure and mechanical properties of Mg-7.71Gd-2.39Nd-0.17Zr alloy after different heat treatments were investigated. The microstructure of the as-cast alloy was composed of α-Mg matrix, bone-shaped α-Mg+β-Mg5(Gd, Nd) eutectic, a little mount of small cuboid phase (GdH2) and Zr-rich cluster within α-Mg matrix. The optimal solution treatment was determined to be at 515oC for 4h. After solution treatment, bone-shaped α-Mg+β-Mg5(Gd, Nd) eutectic was almost dissolved into α-Mg matrix and the grain size was increased slightly. Furthermore, a large amount of GdH2 was precipitated along the grain boundaries and within α-Mg matrix. After subsequent aging treatment at 200 oC for 32h, Mg5Gd phases were precipitated along the grain boundaries. For the peak-aged alloy, the peak hardness of 105 HV was achieved and the ultimate tensile strength, yield strength and elongation at room temperature were up to 188.2MPa, 273.7MPa and 4.1%, respectively, which may be mainly attributed to the β″ and β′ phase precipitated within α-Mg matrix after ageing treatment.