The addition of rare earth (RE) elements in magnesium alloys may significantly enhance the ductility of magnesium alloys, which is generally attributed to the decrease of stacking fault energy, the reduced critical resolved shear stress (CRSS) differences among different deformation modes and the weakening of basal texture. Rare earth elements also change the misorientation between adjacent grains of magnesium alloy, whose effects on the deformation behavior and thus the ductility of magnesium alloy were not emphasized before. In this work, ex-situ high-resolution digital image correlation (HR-DIC) coupled with electron backscatter diffraction (EBSD) was used to reveal the effect of the misorientation on the deformation behavior of a Mg-Y binary alloy from the perspective of local strain. It is shown that the heterogeneity of local strain is largely dependent on the misorientation between adjacent grains. For the intergranular deformation, three scenarios are observed, namely strain transfer, strain concentration and suppressed deformation, which mainly occurs at low misorientation, moderate misorientation and high misorientation, respectively. In addition, much more non-basal slip is found to be activated near the grain boundaries with moderate misorientation angles due to the high geometric compatibility factor (m’B-Pr/Py), which is favorable for the intergranular deformation compatibility, thus reducing the strain concentration near grain boundaries and achieving high ductility. For the intragranular deformation, a wide range of misorientation between adjacent grains in the Mg-Y alloy causes multiple basal slip systems to be activated within a grain, which also facilitates work hardening, thus contributing to improving ductility. Therefore, tailoring the misorientation between adjacent grains may be an effective way to improve the ductility of magnesium alloys.