Zirconium alloys are widely used in nuclear, chemical, aerospace and medical industries due to their extremely low thermal neutron absorption, excellent corrosion resistance, radiation damage resistance, good mechanical properties and biocompatibility. Zr-based alloys prepared by powder metallurgy have the advantages of less macroscopic defects and low cost. However, during the preparation of the powder metallurgy, Zr-based alloys may absorb a much content of oxygen leading to a poor plasticity that was the main reason for limitation of application of Zr alloys. In the present study, the plasticity of Zr-based alloys prepared by the powder metallurgy was improved by doping yttrium hydrides due to the absorption of the yttrium to the oxygen in alloys matrix. The doping amount of YH2 in Zr-10Nb alloy was 0-2.4wt.%. Zr-Nb alloy with relative density over 99 % was successfully prepared by the powder metallurgy process of ball-mill mixing + high-pressure cold isostatic pressing + normal pressure sintering. The effects of YH2 doped content on the microstructure and mechanical properties of Zr-Nb alloys were carefully investigated. The results shown that the O content in the matrix was significantly decreased with increase of doping YH2, in which Y2O3 formed in the matrix. Since oxygen is the stabilizing element of the alpha phase in Zr-based alloys, the change of oxygen distribution can lead to the change of the proportion of alpha and beta phases in the alloy, which in turn affects the mechanical properties of the alloy. When the YH2 doping amount increases from 0 to 2.4wt.%, the proportion of alpha phase in the alloy decreases from 33.48% to 10.74%, and the proportion of beta phase increases from 66.45% to 85.66%. In addition, the average grain size of the alloy was reduced from 313 μm to 104 μm due to the ability of Y2O3 particles to pin the grain boundaries and thus refine the grains. On the one hand, a more plastic beta phase can be retained, which was beneficial to the improvement of plasticity. On the other hand, effects of the dispersion strengthening of Y2O3 particles and the grain refinement caused by formed Y2O3 can both contribute to the improvement of strength. Taking the Zr-Nb alloy with addition of 2.4wt.% YH2 as an example, the dynamic compressive strength of the alloy was decreased by 16% and the plasticity was increased by 140%.