An alloy with the composition of Mg–3.7Zn–0.3Y–0.3Gd (in at.%) which contains quasicrystal phase was studied by multiple means. The as-cast alloy has dendritic structure and consists of α-Mg, I-phase, W-phase, and Mg–Zn precipitations. The alloy was forged one pass and annealed at 440 °C for 4 h, then followed by two passes of compressions. Eutectics were crushed and partially dissolved after deformation and annealing. The tensile strength increased after each forge pass. Submicron scale particles precipitated all around the grains during the deformations, and the amount of precipitations was proportional to the amount of deformations. These precipitated particles were observed by high resolution transmission electron microscopy (TEM). The existence of rhomboid W'-phase with face center cubic (FCC) structure and globular I-phase was confirmed. A quasi-periodicity lamellar phase combined with I-phase was founded, which was considered to be the transient phase between I-phase and W'-phase. This phase had orientation relationship with $\left( {1\bar 101} \right)$ of α-Mg basis and one of the 5-fold planar of the I-phase.