In this study, a Mg-9Gd-4Y-2Zn-0.5Zr (wt.%) alloy was subjected, after solution treatment, to hot compression deformation at different temperatures (350 °C, 400 °C and 450 °C) and different strain rates (0.001 s−1, 0.01 s−1, 0.1 s−1 and 0.5 s−1) on a Gleeble-3800 thermal simulator. The evolution of the stress–strain curves under different conditions was compared. The changes in microstructure caused by the different deformation parameters and the change law of the long-period stacking-ordered (LPSO) phase during compression were observed and analyzed by optical microscope (OM) and scanning electron microscope (SEM). The results show that with the increase in the deformation temperature and the decrease in the strain rate, the degree of dynamic recrystallization (DRX) gradually increased, and the morphology of the phase also changed through, for example, twist fracture. The continuous dynamic recrystallization (CDRX) and discontinuous dynamic recrystallization (DDRX) mechanisms activated during the thermal deformation process can effectively refine the grains and weaken the texture in the alloy.