Nd0.75Mg0.25(Ni0.8Co0.2)3.5 hydrogen storage alloys were prepared by mid-frequency induction melting, and were annealed at 850, 900 and 950 oC for 7 h in 0.03 MPa argon atmosphere. The electrochemical properties, hydrogen storage properties and microstructure of the alloys were investigated. The results show that annealing has little influence on the variation of phase composition in the alloys, and the main phases are Ce2Ni7 type (Nd,Mg)2(Ni,Co)7 phase and CaCu5 type NdNi5 phase. Average grain size and element homogenization of the alloys increase with increasing the annealing temperature, the area of phase interface and the grain stress decrease, and hydrogen storage capacity increases. Simultaneously, the loss of Mg element in the alloys decreases the hydrogen storage capacity owing to higher annealing temperature. So Nd0.75Mg0.25-(Ni0.8Co0.2)3.5 alloy annealed at 900 oC exhibit better hydrogen storage properties; the max discharge capacity of alloy electrode is about 359 mAh/g, the capacity retention rates is about 90.3% after 100 cycles, and the hydrogen absorption capacity is about 1.65 wt%.