In situ synchrotron x-ray diffraction was carried out at beamline BL14B1 of Shanghai Synchrotron Radiation Facility (SSRF) to study the tensile deformation of an extruded Mg-2.2 wt.%Nd alloy before and after aging. The aged specimen that contained β1 (Mg3Nd) precipitates showed higher strength than the nonaged specimen, while the strain to failure of the two specimens was almost equal. Analysis of the lattice strain evolution in the aged specimen revealed a modest load-transfer effect from Mg to β1 after 2% strain. Peak width analysis indicated that a high level of microstrain developed in β1 immediately after material yielding. Ex situ transmission electron microscopy (TEM) showed strong interaction between basal dislocations and β1 precipitates. Based on these results, it is proposed that the extra strength in the aged specimen is caused by β1 impeding dislocation movement and eventually being sheared by dislocations.