Rare-earth-containing Mg alloys are a group of widely investigated alloys due to the disperse nano-sized precipitations formed during heat treatment. The underlying formation and strengthening mechanisms of precipitation is critical for their industrial applications. In this work, we systematically studied the evolution of precipitations in a Mg-10Gd alloy, based on the atomic-scaled TEM and HAADF-STEM observations. Especially, the in-depth transition mechanism from G.P. Zone to β”, β’, βT and βM is proposed, as well as their relationships with mechanical properties. It is found that blocking effect of precipitations improves the strength significantly, according to the Orowan mechanism. The elliptic cylinder shaped β’ phase, with a base-centered orthorhombic lattice structure, provides significant strengthening effects, which enhance the hardness and ultimate tensile strength from 72 HV and 170 MPa to 120 HV and 300 MPa.