The effects of mischmetal addition and hot working on the enhancement of microstructure and mechanical properties of Mg–Ni alloys were studied. It was revealed that grain refinement could be achieved by introducing rare earth (RE) elements in the as-cast condition, and more pronouncedly, by the extrusion process in the wrought condition. While the formation of intergranular brittle phases via RE addition impaired the as-cast mechanical properties, the remarkable grain refinement and fragmentation and dispersion of intermetallic particles significantly improved the mechanical properties in the extruded condition. The ultimate tensile strength and total elongation of the extruded Mg–1.5Ni–3RE alloy with an average grain size of 3.18 μm (347 MPa and 9%) were much larger than those for the as-cast counterpart (140 MPa and 3%).