Semi-solid feedstock of AZ80 magnesium alloy modified by trace rare-earth Y element (0, 0.2, 0.4, 0.8 wt. %) was fabricated by strain-induced melting activation (SIMA) in the form of extrusion and partial remelting. The effect of Y addition on the microstructure evolution of the extruded and isothermally heat treated alloy was observed by using an optical microscope (OM), scanning electron microscope (SEM), X-ray diffraction (XRD) and quantitative analysis. The results show that the Y addition can refine the microstructure and make the β-Mg 17 Al 12 phases agglomerate. During the subsequent isothermal treatment at 570 • C, the average solid grain size, shape factor and liquid fractions increased with the prolonged soaking time. The smaller spheroidal solid grains and larger shape factor were obtained in the semi-solid microstructure due to Y addition. The coalescence and Ostwald ripening mechanism operated the coarsening process of solid grains simultaneously. The coarsening rate constants of AZ80M1 (0.2 wt. % Y addition) of 164.22 µm 3 ·s −1 was approximately four times less than the un-modified AZ80 alloy of 689.44 µm 3 ·s −1 . In contrast, the desirable semi-solid structure featured, with fine and well globular solid grains, an appropriate liquid fraction, and shape factor was achieved in AZ80M1 alloy treated at 570 • C for 20-30 min.