The effects of Nd on the microstructure and mechanical properties of Mg-13Gd-0.5Zr alloy were studied by X-ray diffraction, optical microscope, scanning electron microscope, energy dispersive spectrometer and electronic tensile testing machine. The mechanism of grain refinement is discussed based on the mismatch theory and the change rule of dislocation density. The strengthening mechanism is also discussed from fine-grained strengthening and precipitation strengthening. It is found that the main constituent phases of Mg-13Gd-0.5Zr alloy are α-Mg and Mg₅Gd. The addition of Nd forms a new phase Mg₄₁Nd₅ in the alloy and fines the grain of the alloy. The addition of Nd significantly improved the mechanical properties of Mg-13Gd-0.5Zr alloy at room temperature and high temperature. When the addition of Nd is 2%, the mechanical properties of the alloy reach the maximum values of 279 (room temperature) and 319 MPa (250 C) at room temperature and high temperature. The improvement of mechanical properties of the alloy is mainly attributed to the dual effects of precipitation strengthening and fine grain strengthening of Mg₅Gd and Mg₄₁Nd₅ phases. Brittle fracture is the main fracture mode of Mg-13Gd-2Nd-0.5Zr alloy at different temperatures. As the stretching temperature increases, the alloy changes from brittle fracture to ductile fracture.