Three Mg–Y(–Gd)–Ag–Zr alloys with an iso-concentration of total alloying elements but different Y/Gd atomic ratios were hot extruded at 350 °C and their microstructures and mechanical properties were comparatively studied. Extruded Mg–2.4Y–0.4Ag–0.1Zr (at.%) base alloy shows a bimodal-grained structure composed of fine equiaxed recrystallised grains and coarse elongated unrecrystallised grains and has a 011¯0//ED (extrusion direction) texture. In contrast, when Y is partially replaced with Gd, extruded Mg–1.6Y–0.8Gd–0.4Ag–0.1Zr (at.%) and Mg–0.8Y–1.6Gd–0.4Ag–0.1Zr (at.%) alloys with the Y/Gd atomic ratio of 2 and 0.5, respectively, exhibit a near fully recrystallised structure and have a [0001]//ED texture. While basal γ″ precipitates dominate but few β′ precipitates form in Mg–2.4Y–0.4Ag–0.1Zr alloy, a large number density of both β′ and γ″ precipitates form in Mg–1.6Y–0.8Gd–0.4Ag–0.1Zr and Mg–0.8Y–1.6Gd–0.4Ag–0.1Zr alloys after post-extrusion ageing. Precipitation in the Gd-containing alloys is considerably enhanced by partial substituting Y with Gd. The peak-aged Mg–1.6Y–0.8Gd–0.4Ag–0.1Zr alloy keeps a relatively good balance between grain boundary strengthening, dispersion strengthening and precipitation hardening and thus obtains a good combination of strength and ductility, whose room temperature tensile yield strength, ultimate tensile strength and elongation are 377 MPa, 479 MPa and 8.0%, respectively.