The effect of rare earth element Y and its content on the microstructure and mechanical properties of the Mg-2.0Zn-0.3Zr alloy and the mechanism were investigated by adding different contents of Y in the alloy. The results indicate that when the Y content changes from 0.9% to 1.9 % (mass fraction, similarly hereinafter), the microstructure becomes finer obviously and the intercrystalline compound looks like a continuous thin net; while when the Y content increases to 3.7%, the compound shows discontinuous thick net. The strength of the alloy is improved gradually when the Y content increases from 1.9% to 5.8%. The preferable plasticity with a maximal elongation of 24.8% is obtained when the Y content is 0.9%, due to the refinement effect of Y and proper W-phase content. When the Y content is 3.7%, the W-phase is less due to the presence of X-phase, while the intercrystalline compound becomes discontinuous thick net, which are favorable to improving plasticity of the alloy. The alloy with 3.7% Y has better comprehensive mechanical properties than others, with the tensile strength of 232 MPa, the yield strength of 124 MPa and the elongation of 23.5%. The Y element addition can lead to an increase of the flow stress and the deformation resistance of the alloy; annealing at 420 oC for 12 h and hot deformation at 450 oC can improve the extrudability and better comprehensive mechanical properties for the alloy can be obtained