Lightweight equipment in aerospace and other fields urgently requires magnesium (Mg) alloys components with high-strength plasticity. For this reason, in this study, a gradient heterogeneous structure containing nanocrystallines was constructed successfully using a severe shear deformation process that combines severe plastic deformation techniques and torsional deformation characteristics. The evolution of the microstructure and hardness of Mg-12.12Gd-4.2Y-2.28Zn-0.36Zr (wt%) alloys prepared by severe shear deformation with changes in deformation temperature were investigated. The gradient heterogeneous structure of the alloys formed naturally under high hydrostatic pressure and severe shear stress, and its thickness increased with the deformation temperature. With the application of shear stress, a large amount of rotational dynamic recrystallization (RDRX) behavior occurs in the alloys, refining the coarse initial grains (∼126.3 µm) into fine grains (∼2.03 µm) or even ultrafine grains (∼1 µm). During the RDRX process, low angle grain boundaries (LAGBs) began to form at high distorted grain boundaries and unique lamellar structures, followed by a rapid expansion into the interior of the grains, which ultimately results in the grains being completely covered by subgrains. Meanwhile, the continuously broken long-period stacking-ordered (LPSO) phase and the precipitated bright rare earth rich (RE-rich) phase provide a large number of nucleation sites, further promoting the refinement process of the grains. Subsequently, the grains were further refined to nanocrystallines through the formation and rotation of subgrains under continuous loading of stress. The massive formation of nano-precipitated phases (β phases) along grain boundaries were accompanied by the complete disappearance of other types of second phases. The sources of β phases formation include the layer-by-layer decomposition of the cellular phases and the dissolution/re-precipitation of the LPSO phases. In addition, the introduction of shear stress promotes the random orientation of the DRXed grains through the extensive activation of pyramidal <a> and pyramidal <c+a> slip. The hardness of the alloys gradually decreased as the cumulative strain decreased at different deformation temperature conditions. When the deformation temperature was 440°C, the alloys reached a maximum hardness of 127.67 HV, which was nearly 43.5% higher than homogenized alloys. The ultra-high hardness of the alloys prepared by severe shear deformation is mainly attributed to grain boundary hardening, diffusion hardening and hetero-deformation induced (HDI) hardening.