The microstructures of both as-cast and heat treated Mg-2.54Nd-0.26Zn-0.32Zr alloy were investigated by means of XRD, DTA, OM and TEM in this study. The results show that the massive Mg-RE phase Mg12Nd is mainly distributed on the grain boundary of as-cast Mg-2.54Nd-0.26Zn-0.32Zr. Only a small amount of flaky and grainy Mg12Nd distribute in the intracrystalline and grain boundary. The Mg12Nd phase is uniformly distributed on the matrix as crossed plate gathered by spotted state phase after solution and aging treatment.