The microstructure and mechanical properties of Mg3.5Zn0.6Gd alloy containing quasicrystals was investigated after extrusion, the role of nanoquasicrystals on the ductility of alloy was analyzed. The results indicate that nanoquasicrystal was formed and distributed along grain boundary and in the matrix for Mg3.5Zn0.6Gd alloy after extrusion. As-extruded Mg3.5Zn0.6Gd alloy containing I-phase showed one relatively random and homogeneous texture due to the local lattice rotation during deformation. The Mg3.5Zn0.6Gd alloy extruded at 673 K exhibits larger elongation about 94% at 473 K, which could been ascribed to the combination of random texture and higher content of I-phase precipitated during extrusion at higher temperature. The a + c type dislocations can be effectively active due to the existence of nanoquasicrystals. The strengthening mechanism of Mg3.5Zn0.6Gd alloy can be explained as the dislocations annihilation effect. This annihilation of dislocations can play a role in the increase of flow strain during deformation.