Microstructure evolution and fracture behavior of Mg-9.5Gd-0.9Zn-0.5Zr alloy subjected to different heat treatments were systematically investigated using SEM and TEM as well as tensile testing. It was found that the microstructure of the as-cast alloy consisted of α-Mg matrix, net-like eutectic compounds (α-Mg + Mg3 (Gd, Zn)), cubic GdH2 phases and lamellar 14H LPSO phases. After solution treated at 515 °C for 24 h, two different cooling processes were used to elucidate the effect of cooling rates on the precipitation microstructure. With a hot water quenching, those secondary phases were completely dissolved. Instead, grey-like patches were observed within the α-Mg matrix, which were proposed to be rod-like Zn2Zr3 phases around the α-Zr particle. In contrast, with a furnace cooling, the formation of 14H LPSO and several cubic Mg3 (Gd, Zn) phases was observed. Furthermore, after hot water quenching, the subsequent ageing treatment parameters were also optimized to be 225 °C for 48 h. In the peak-aged condition, a denser and uniform distribution of basal precipitates γ″ and several basal precipitates γ′ together with Zn2Zr3 and ZnZr2 phases were observed. The samples after the solution treatment (for both hot water quenching and furnace cooling) showed a much higher ductility than the as-cast alloy, while the tensile yield strength (TYS) and ultimate tensile strength (UTS) remained unchanged. After the peak-ageing, a significant increase in the TYS and UTS but a great loss in ductility was observed. In the as-cast alloy, the initiation of microcracks occurred from the net-like eutectic compounds, which was believed to be one of the most important reasons for the tensile fracture, and showed a co-existence of intergranular and transgranular fracture behavior. After the solution treatment, with a hot water quenching, the fracture can be mainly related with failures along contraction twins, and then showed a transgranular fracture behavior. While, with a furnace cooling, due to the presence of the kinked 14H LPSO phases, the fracture was caused by the broken of 14H LPSO phases, and then lead to a transgranular fracture. The peak-aged alloy exhibited a brittle intergranular fracture, which can be related with failures along soft precipitation free zones (PFZs).