Ytterbium (Yb) containing magnesium alloys have aroused extensive interests because of their excellent mechanical properties. Unfortunately, their potential biomedical applications as a biodegradable implant material remain uncertain to date. In this study, in vitro degradation behavior and biocompatibility of the newly developed Mg–5.8 Zn–2.0 Yb–0.5 Zr (wt.%, denoted as ZYbK620) alloy during aging treatment were investigated. The results reveal that the dimension and distribution of Yb containing phases act a significant role in biocorrosion resistance and biocompatibility of ZYbK620 alloys. The peak-aged sample with much finer and denser nanoprecipitates possesses the lowest corrosion rate and best integrity after long-term immersion. Further biocompatibility testing demonstrates that the alloys with different aging times all exhibit favorable cytocompatibility and hemocompatibility, suggesting that the ZYbK620 alloy can be a promising candidate for biomedical applications.