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In the present study, the microstructure and mechanical properties of a new Mg-4Al-3.5Ca-2Gd (AXE432) alloy are investigated. The microstructure of the as-cast AXE432 alloy consists of α-Mg, C14 (Mg₂Ca), and C36((Mg, Al)₂Ca) phases. After the heat treatment at 480 °C for 8 h, the C14 with fine lamellar structure changes from narrow stripes to micro-scale particles, and part of the C36 and the C14 dissolve into the α-Mg matrix, with many short needle-shaped C15 (Al₂Ca) phase precipitating in the primary a-Mg grains. The AXE432 alloy extruded at a temperature as high as 420 °C exhibits a refined dynamically recrystallized (DRXed) microstructure with grain sizes less than 1.5 ± 0.5 μm and a strong {0001}<10<inline-formula><math xmlns="http://www.w3.org/1998/Math/MathML" display="inline"><semantics><mrow><mover accent="true"><mrow><mn>1</mn></mrow><mo>¯</mo></mover></mrow></semantics></math></inline-formula>0> basal texture with a maximum intensity of 5.62. A complex combination of the effects from grain size, texture, second-phase particles, and strain hardening results in balanced mechanical properties, with the tensile yield strength (TYS), ultimate tensile strength (UTS), elongation (El), compressive yield strength (CYS), and ultimate compressive strength (UCS) of 331.4 ± 2.1 MPa, 336.9 ± 3.8 MPa, 16.1 ± 2.3%, 270.4 ± 1.6 MPa and 574.5 ± 12.4 MPa, respectively.