The La0.67Mg0.33Ni2.5Co0.5 hydrogen storage alloy with PuNi3-type was prepared using induction melting followed by heating treatment. In order to compensate Mg loss during alloy melting, the different mass percent Mg was supplemented into the melt. The microstructure and electrochemical properties of the alloys were investigated by using XRD and electrochemical method. The results show that the ingot is composed of main phase with PuNi3 type structure and a little second phase with CaCu5 structure. After heat treatment at 1 223 K for 10 h, the amount of the second phase in the annealed alloy is remarkably decreased and a more homogenous and purified PuNi3 type microstructure is obtained in the case of 10% Mg supplement. The electrochemical analyses show that the electrochemical properties of the alloy, such as activation, capacity, cycling stability and discharge ability at different current density, are well improved by supplementing proper Mg and annealing heat treatment. In comparison with AB5 type and AB2 with laves phase hydrogen storage alloys, the La0.67Mg0.33Ni2.5Co0.5 alloy has high capacity and quite good kinetics of electrochemical reaction.