In this work, the Mg-9.1Y-1.0Zn alloy are prepared by semi-continuous casting, and then mechanical milled with graphite. The microstructures and hydrogen storage properties of milled composite are systematically studied. The results show that the as-cast Mg-9.1Y-1.0Zn alloy exhibits serious agglomeration after milling. The addition of graphite significantly restrains the agglomeration of alloy and further refines the particles. Compared with as-cast Mg-9.1Y-1.0Zn alloy, the hydrogen storage properties of Mg-9.1Y-1.0Zn alloy milled with graphite is greatly improved. It needs only three times activation to be fully activated and its maximum hydrogen storage capacity is about 6.7 wt%. Besides, its dehydrogenation activation energy is decreased by about 40 kJ mol−1 relative to as-cast Mg-9.1Y-1.0Zn alloy. During hydrogen absorption and desorption, the stable YH2 hydride is generated by the disproportionation decomposition of LPSO phase. The graphite and in-situ formed YH2 present the synergistic confinement and catalysis effects on the milled Mg–Y–Zn alloy particles, which is conductive to the enhancment of hydrogen storage properties.