Age-hardening has been considered as an efficient way to enhance the creep resistance of Mg-RE alloys for a long time. However, the present work reported the unexpected deterioration on the creep resistance of a hot-rolled Mg-8wt%Gd alloy after peak-aging treatment. The tensile creep tests at 523 K were carried out on the alloy after solid solution (AS sample) and peak-aging treatment (AA sample), respectively. For the AA sample, after peak-aging treatment, static precipitates were preset in grain interiors but precipitate-free zones (PFZs) were unevenly distributed along some grain boundaries. During creep loading, the fast resolution of pre-existing precipitates promoted the PFZ widening and the grain boundary cracking. With the precipitation strengthening gradually reducing, pyramidal <c+a> slip become the dislocation creep mechanism besides <a> dislocation cross-slip, and further accelerated the creep rate. Consequently, the above-mentioned phenomena led to the unexpectedly deteriorated creep resistance of the AA sample. On the contrary, for the AS sample, the dynamic precipitates were gradually generated during creep loading and successfully enhanced the creep resistance.