A high damping Mg-Zn-Y alloy containing LPSO phase and I phase was investigated. The microstructure of a high damping Mg80Y4Zn16 (at%) alloy was examined by optical microscopy (OM) and SEM. Furthermore, the differential thermal analysis (DTA) was used to analyze its phase transformation. Microstructure evolution and damping properties under the conditions of the different solid solution time (3, 6, 9 h) were studied. The results show that the main phase component of the Mg80Y4Zn16 alloy is α-Mg, Mg12ZnY (X phase), Mg3Zn6Y (I phase) and Mg10ZnY2 phase (LPSO phase), in which I phase and LPSO phase coexistence is firstly reported. The average damping value of the alloy is 0.03, indicating that it is a high damping alloy. The damping is strain amplitude dependent. The high damping mechanism was also discussed.