Effect of Nd on as-cast microstructure and mechanical properties of AZ31 magnesium alloy were investigated by ICP, metallographic microscopy, SEM, EDS, XRD and mechanical measurement. The results show that the microcontent of Nd added in AZ31 alloy could result in the formation of intermetallic compounds of Al2Nd and Mg12Nd at grain boundary and in α-Mg matrix, and the absorption rate of Nd reached 95%, which obviously refined AZ31 alloy microstructure and further improved mechanical properties. The AZ31 alloy containing Nd showed a tensile strength of 245 MPa, a yield strength of 171 MPa and a elongation of 9%.