In this paper, the role of trace Ag in the dynamic recrystallization (DRX) behaviors and mechanical properties of Mg-7.5Gd-1.5Y-0.4Zr (wt.%) alloy are illustrated, aided by hot deformation with advanced characterization techniques. Results show that dynamic precipitates cannot occur at temperatures of 420 °C and 470 °C. Adding 0.5 wt% Ag causes sluggish DRX in Mg-Gd-Y-Zr alloys, and grain boundaries are more stable due to Gd and Ag co-segregation, which improves the flow stress during hot compression. To better illustrate the relationship between Ag micro-alloying and mechanical properties, based on the hot compression test, Mg-Gd-Y-Zr extrusion bars with and without Ag are fabricated at 470 °C and at an extrusion ratio of 9. The Mg-7.5Gd-1.5Y-0.4Zr-0.5Ag (wt.%) extrusion bar exhibits excellent strength in the synergistic strengthening effects of the strong texture, high density dislocation, and segregation of Gd and Ag at grain boundaries. Therefore, this work lays the foundation for the subsequent fabrication of large-scale components in Ag-free and Ag-containing Mg-Gd-based alloys.