In this work, the Mg-8.5Gd-2.5Y-0.3Zr (wt. %) and Mg-8.5Gd-2.5Y-0.5Zn-0.3Zr (wt. %) alloys were subjected to indirect extrusion. The microstructure and mechanical properties of the two alloys were carefully investigated to clarify the effect of trace Zn, in terms of solid solution Zn atoms and γ′ phases, on the Mg-Gd-Y-Zr alloy. The results indicate that the addition of trace Zn stimulates the precipitation of γ′ phases and suppresses the grain boundary segregation during preheating treatment conducted before extrusion. During extrusion, the dynamic recrystallization (DRX) occurs via both discontinuous DRX (DDRX) and continuous DRX (CDRX) mechanisms. The addition of Zn impedes the DRX process, resulting in a lower recrystallization fraction and a strong fiber texture in the Zn containing alloy. The dynamic precipitation occurs along with the DRX. Trace Zn modifies the distribution of dynamic precipitates, resulting from the varied distribution of solute elements. Finally, it is found that the addition of trace Zn notably enhances the mechanical strength and stimulates the occurrence of yield point in the as-extruded alloy.