The effects of terbium addition on the microstructures and properties of polycrystalline Ni48.8Mn29.7Ga21.5 alloy (numbers indicate at.%) were investigated. The results show that the grain size of Ni-Mn-Ga alloy decreases significantly with the addition of Tb, and Tb elements are found to exist in the grain boundary region and form a (Ni, Tb)-rich quaternary phase. The compressive ductility and fracture toughness increased with the addition of Tb. The improvement of mechanical properties and the slight change of martensitic transformation temperature and the magnetic properties of the Tb-added alloys are discussed in terms of the modification of microstructures with the addition of Tb.