The evolution of microstructure and texture for the Mg-9Gd-4Y-0.6Zr extruded alloy during static annealing was investigated. The grain growth, precipitation and texture modification were characterized by optical microscopy, scanning electron microscopy, transmission electron microscopy, differential scanning calorimeter, XRD texture instrument and EBSD. The results show that the recrystallization process resulted in the grain refinement at the initial stage of static annealing, and that the intergranular deformation stimulated local precipitating which in turn inhibited the recrystallization process. The texture analysis indicates that the hot extrusion produces the conventional basal fiber with {0001} // ED and the unusual prismatic fiber with c axis // ED. During static recrystallization, the process of grain nucleation weakens the prismatic fiber, while the process of grain growth strengthens it. A large number of plate phases precipitate at grain boundaries along with subgrain boundaries, which significantly inhibits the texture modification.