The effects of rare Earth addition and hot extrusion process on the grain refinement of magnesium alloy were studied. The as-cast Mg-6Al-1Zn (AZ61) alloy had the average grain size of ~ 64 μ m and its microstructure consisted of α-Mg and Mg17Al12 phase. By partial substitution of Al with Gd to reach Mg-4. 8Gd-1. 2Al-1Zn alloy, it was observed that the Mg17Al12 phase disappeared and two new intermetallic phases, i. e. (Mg, Al)3Gd and Al2Gd, were identified. The extrusion process showed significant effects on the shape and size of intermetallics and grain size of the matrix. The grain size of the extruded Mg-6Al-1Zn alloy was refined from 64 μ m to 13. 4 μ m as a result of recrystallization. Regarding the Mg-4. 8Gd-1. 2Al-1Zn alloy, the grain refinement was much more pronounced, where the extruded grain size has been refined from 698 μ m to 2. 4 μ m (extruded at 385 ° C) and 1. 3 μ m (extruded at 320 ° C). This was related to the presence of fine and widely dispersed intermetallic phases. Tensile strength and total elongation of extruded alloys were much higher than their as-cast counterparts and the extruded Mg-6Zn-1Al alloy showed magnificent Mechanical properties. The latter was related to the absence of intermetallic particles, which act as stress risers.