In this work, the deformation behaviour of a twin-roll cast (TRC) Mg-6.8Y-2.5Zn-0.4Zr alloy during plane strain compression was characterised by high-temperature testing. Based on the experimental data, the values of strain-rate sensitivity, the efficiency of power dissipation and the instability parameter were investigated under the conditions of various hot deformation parameters. In contrast to conventionally cast material, no lamellae of the LPSO (long period stacking ordered) phase were precipitated in the magnesium matrix after TRC. The precipitation of fine lamellar LPSO phases only occurred during cooling to forming temperature after the heat treatment. Dynamic recrystallization (DRX) hardly occurred during deformation at temperatures between 350 °C and 400 °C. This can be attributed to the precipitation of the lamellar LSPO phases, which contribute to retardation of the DRX process. At higher deformation temperatures and strain rates DRX is pronounced and the twin-induced (TRDX) as well as continuous dynamic recrystallization could be identified as the dominant softening mechanisms. The processing maps were established by superimposing the instability map over the power dissipation map, this being associated with microstructural evolution analysis in the hot deformation processes. Two instability zones could be recognised for the twin-roll cast and heat-treated Mg-6.8Y-2.5Zn-0.4Zr alloy: (1) 350 °C to 460 °C and 0.01 s−1 to 0.3 s−1 and (2) 485 °C to 525 °C and 2.5 s−1 to 10 s−1, where deformation is not favourable.