The microstructure and mechanical properties of as-cast and shear-extruded Mg-5·0Sn-1·5Y-0·1Zr alloys were investigated in detail using optical microscopy, scanning electron microscopy, X-ray diffraction and tensile tests. Results showed α -magnesium (α -Mg) dendrite, discontinuous acicular Mg2Sn and rod MgSnY phases along the grain boundaries in the as-cast alloy with an average grain size of 90 μm. The fine rod and the acicular Mg2Sn and MgSnY phases, as well as their aggregations, were dispersed in the shear-extruded alloy. The grain size was refined to below 6.0 μm at a shear-extrusion temperature of 473 K and the tensile strength was increased from 131 MPa to 256 MPa, which is attributed to the improved grain bonding strength.