Due to the extremely high chemical reactivity of gadolinium (Gd), especially the removal difficulty of trace impurities, preparation of ultra-high purity Gd is challenging. Herein, we introduce H-2 into Ar plasma arc, building a reductive gas flow with high-density thermal energy. H-2+Ar plasma arc melting performs a wonderful refining effect despite of high initial concentrations. Migration ways and removal mechanism of various impurities have been systematically analyzed. Electromagnetic driving force and turbulence thermal flow of the hydrogen plasma arc are numerically simulated. Results show that activated hydrogen ions, dissociated in plasma arc and bringing special physical and chemical interactions, are supposed to be the cause for the excellent refining effect.