Local atomic structures of an amorphous Mg65Cu25Gd10 alloy and the structural changes by thermal annealing have been studied by extended X-ray absorption fine structure (EXAFS). The correlation between structural changes and mechanical properties for the Mg65Cu25Gd10 alloy has also been discussed. Results showed that Cu atoms around Gd in Mg65Cu25Gd10 lost rapidly during annealing, resulting in the segregation of Cu atoms. The coordination number NGd-Mg of Mg65Cu25Gd10 annealed at 373 K first diminished and then augmented with the increase of annealing time. The formation of polyhedral short-range order unit with coordination number of nearly 12 around Gd atoms is in favor of the improvement of mechanical properties. The chemical short-range order, not topological short-range order in the amorphous Mg65Cu25Gd10 alloy had obvious changes during annealing.