The effects of Ce and Y addition on microstructure evolution and precipitation of Cu-Mg alloy hot deformation were investigated by hot compression test in the 500–850 °C temperature range and the 0.001–10 s−1 strain rate range. The influence of rare earth elements on true stress-true strain curves and microstructure evolution of Cu-Mg alloy were obtained, the deformation mechanism under various conditions was defined, and the critical strain of Cu-Mg, Cu-Mg-Ce, and Cu-Mg-Y alloys and the resulting precipitates were determined. Dynamic recrystallization dominated the deformation process at high temperature and low strain rate. Ce and Y significantly delayed dynamic recrystallization and improved flow stress and activation energy of Cu-Mg alloy. The critical strains for Cu-Mg, Cu-Mg-Ce, and Cu-Mg-Y alloys deformed at 700 °C and 0.1 s−1 were calculated to be 0.075, 0.1, and 0.14, respectively. Precipitates appeared in the Cu-Mg-Ce and Cu-Mg-Y alloys deformed at 850 °C and 0.001 s−1, which were determined to be Cu2Mg. In addition, CuP2 phase was found in both Cu-Mg-Ce and Cu-Mg-Y alloys deformed at 800 °C and 0.01 s−1. Precipitates caused dislocation and grain boundary pinning. Furthermore, a large number of twins appeared in the Cu-Mg-Ce and Cu-Mg-Y alloys, which increased the number of grain boundaries and furthered grain refinement.