Six kinds of Mg-2.5 at%Zn-0.5 at%RE (RE: rare earth element, Y, Gd, Tb, Dy, Ho and Er) alloys with grain size of 1$2 mm and containing a quasicrystalline icosahedral phase were prepared by casting and extrusion. These alloys had high strength and high fracture toughness balances, due to the synergetic effect of grain refinement and the dispersion of quasicrystalline phase particles. Microstructural observations showed a ductile fracture pattern, and that the origin of void nucleation was not the quasicrystalline phase particles but the conventional precipitates and the W-phase particles, because of the difference in the interface structure between the matrix and the particles.