The microstructures and mechanical properties, especially the contribution of individual strengthening mechanisms, of Mg–10Gd–0.4Zr alloy with the partial substitution of Gd with Nd are studied. The results show that Mg12Nd phases appear in the as‐cast alloys when substituting Gd with Nd, and the volume fraction of the secondary phase increases with increasing Nd content. After solution heat treatment, secondary phases fully dissolve into α(Mg) matrix except for Mg–5Gd–5Nd–0.4Zr alloy, which is attributed to a high Nd content in that alloy, beyond the maximum solubility of Nd in Mg. Age‐hardening curves indicate that substituting Gd with Nd shortens the incubation time and improves the peak hardness. The peak‐aged Mg–7Gd–3Nd–0.4Zr alloy shows improved mechanical properties with the yield strength, ultimate tensile strength, and elongation of 195 MPa, 294 MPa, and 3.9%, respectively, which is attributed to the dense β″ and β′ precipitates formed during aging. Furthermore, the contributions of individual strengthening mechanisms in Mg–Gd–Nd–Zr alloys after different heat treatments are calculated, and the results show that the substitution of Gd with Nd significantly enhances the contribution of precipitation strengthening, especially in peak‐aged Mg–7Gd–3Nd–0.4Zr alloy.