Microstructures and mechanical properties of Mg-5Y-0.6Zr-xNd (x=0, 0.5 and 1wt.%) alloys under various heat treatment conditions were investigated by optical microstructure (OM), scanning electron microscope (SEM), X-ray diffraction (XRD), electron backscatter diffraction (EBSD) and tensile tests. Results showed that with increasing content of Nd, the amount of second phases Mg24Y5 and Mg14Nd2Y (β) was increased in the matrix. Minor Nd addition can reduce the stacking fault energy of α-Mg and promote the dynamic recrystallization during hot-rolled process. As the Nd content increases, the volume fraction of static recrystallization was promoted obviously. The average grain size of Mg-5Y-0.6Zr-0Nd alloy after annealed treatment can be refined to 3.73 μm. Tensile strength of as-rolled alloys increased with the addition of Nd, while the elongation exhibited an opposite change tendency. As-rolled alloy sheet with 1.01 wt.% Nd exhibited the remarkable mechanical properties, which the values of ultimate tensile strength, yield strength and elongation were 336 MPa, 278 MPa and 16.3%, respectively. Based on the microstructure observation, the changes of mechanical properties have been discussed.