A new heat source combination, consisting of a uniform body heat source and a tilted double ellipsoidal heat source, has been developed for cold metal transfer (CMT) wire-arc additive manufacturing of Mg-Gd-Y-Zn-Zr alloy. Simulations were conducted to analyze the temperature field and stress distribution during the process. The optimal combination of feeding speed and welding speed was found to be 8 m/min and 8 mm/s, respectively, resulting in the lowest thermal accumulation and residual stress. Z-axis residual stress was identified as the main component of residual stress. Electron Backscatter Diffraction (EBSD) testing showed weak texture strength, and Kernel Average Misorientation (KAM) analysis revealed that the 1st layer had the highest residual stress, while the 11th layer had higher residual stress than the 6th layer. Microhardness in the 1st, 11th, and 6th layers varies due to residual stress impacts on dislocation density. Higher residual stress increases dislocation density, raising microhardness in components. The experimental results were highly consistent with the simulated results.