Through independently developed stress-loading equipment, stress corrosion tests on Mg-Gd-Y alloy were conducted in a 3.5 wt% NaCl solution. The effects of plastic compressive stress on the corrosion behavior of the alloy were thoroughly investigated using scanning electron microscopy (SEM) and transmission electron microscopy (TEM) among other microscopic analysis techniques. The results indicate that the alloy mainly consists of α-Mg grains, Mg24Y5 phase, Mg5Gd phase, and LPSO phase. The corrosion behavior of the Mg-Gd-Y alloy is significantly influenced by the microstructure of the interface between the precipitates and the matrix, the potential difference, and the stress state. In the unstressed state, the Mg24Y5 phase first induces corrosion at the edges of the α-Mg grain boundaries, which then spreads internally. Upon the application of plastic stress, the corrosion-inducing capability of the LPSO phase on α-Mg grains notably increases. This discovery provides new insights into the mechanisms by which plastic compressive stress affects the corrosion behavior of Mg-Gd-Y alloys and offers an important basis for the theoretical research and anti-corrosion design in the engineering applications of this alloy.