The localized micro-galvanic corrosion process and the kinetic information of Mg−(7,9)Al−1Fe−xNd alloys were investigated by in situ observation under electrochemical control and in situ atomic force microscopy (AFM) in an electrolyte environment. The results revealed that the formation of the Nd-rich phase in alloys resulted in a decrease in the Volta potential difference from ~400 mV (AlFe3/α-Mg) to ~220 mV (Nd-rich/α-Mg), reducing the corrosion products around the cathodic phase and corrosion current density of the microscale area. The addition of Nd significantly improved the corrosion resistance, mainly due to the suppression of the micro-galvanic corrosion between the second phases and substrate. Finally, the corrosion mechanism of Mg−(7,9)Al−1Fe−xNd alloys was discussed based on in situ observations and electrochemical results.