AZ31 alloy with minor RE addition was investigated. The material was homogenized, hot-rolled and annealed. Optical microscopy, scanning electron microscopy and X-ray diffractometry were employed to characterize the microstructures of AZ31 alloy with RE addition. And micro-hardness test was employed to measure mechanical properties of annealed material. The results show that minor RE addition (0.3% is mass fraction) has little effect on the grain size of as-cast AZ31 alloy, and only Mg17(Al, Zn)12 phase was found in the microstructure of as-cast AZ31RE alloy. The result of X-ray diffraction shows that supersaturation of alloying elements has little effect on the lattice parameters of the α-Mg in homogenized sample; but owing to RE solute with high melting point, AZ31RE alloy exhibits better heat resistance than AZ31 alloy.