Microstructure and mechanical properties of a newly developed Al–4Mg–2Fe alloy prepared via high pressure die casting (HPDC) were studied. Attention was focused on the characteristics of the iron-rich intermetallic compounds (IMCs) and their influence on crack initiation and propagation. Result shows three types of iron-rich IMCs (Al13Fe4) existed in the alloy. The first is the primary iron-rich IMCs (P-IMCs) precipitating prior to the α-Al phase. These IMCs comprised external solidified iron-rich IMCs (P-IMC)I forming inside the shot sleeve and secondary iron-rich IMCs (P-IMCs)II inside the cavity. The second is fine ternary eutectic iron-rich IMCs (TE-IMCs), one of the phases of the ternary Al–Al8Mg5–Al13Fe4 eutectic. The third is binary eutectic iron-rich IMCs (BE-IMCs), which formed between P-IMCs and TE-IMCs via binary eutectic reaction: L→Al + Al13Fe4. Accordingly, the (P-IMCs)I acted as crack initiation sources regardless of the orientation due to the extremely large size and aspect ratio. The (P-IMCs)II exhibiting a large aspect ratio but small size accelerated the crack propagation. The BE-IMC and TE-IMCs, due to the tiny small size and aspect ratio, barely exhibited any effect on the final failure.