In Mg–Si alloys, both primary and eutectic Mg2Si particles normally appear with sharp edges, which can lead to weak mechanical properties as the result of stress concentration at the sharp corners of these brittle particles. Thus, it would be of great importance to modify the morphology of these particles. In this study, microstructure modification mechanisms after 0.5 wt% Y addition and heat treatment (HT) at 420 °C for 24 h are comprehensively studied in hypo-eutectic Mg–1Si and hyper-eutectic Mg–2Si alloys. Microstructural observations were performed using optical and scanning electron microscopy equipped with electron disperse spectroscopy, while phase analysis was done by X-ray diffraction. Mechanical properties of the studied alloys were evaluated by shear punch testing technique. The obtained results indicate that 0.5% Y addition to the as-cast Mg–1Si and Mg–2Si alloys could modify morphology of the eutectic Mg2Si from coarse lamellar to very short rod-shaped. The poisoning effect of Y was the main mechanism for this modification. The ultimate shear strength (USS) increased after Y addition to the Mg–1Si and Mg–2Si alloys, due to the modified eutectic Mg2Si morphology and also formation of fine Y-containing particles. Moreover, it was observed that HT could modify the morphology of the eutectic Mg2Si phase to the punctiform or disconnected rod-shaped in the studied alloys. Another important effect of HT was observed to be rounding sharp corners of the primary Mg2Si particles and changing their morphology to some new shapes such as star-like, indicating unstable morphology of the primary Mg2Si particles in the Mg–2Si–0.5Y alloy at high temperature. The USS values were improved for the Mg–1Si and Mg–2Si alloys after HT due to the modified morphology of the Mg2Si particles.