The microstructure, annealing strengthen and compressive deformation mechanism of Mg-5.3Nd alloy were investigated by using of OM, XRD, SEM/EDS and room temperature compression test, the results showed that the main second phase on as-casting Mg-5.3Nd alloy was Mg12Nd and the optimal solution treatment was 550 ℃×8 h for eliminating the second phases. Not subsequent unload and recompression but annealling treatment between pre-compression and recompression could markedly increase the compression strength of pre-deformed Mg-5.3Nd solid solution and the optimal annealing process was 180℃×4 h to reach the strength increament of 47MPa. The in-situ optical micrographs indicated that the preformed twins in the pre-compressed Mg-5.3Nd alloy untreated by annealing obviously grew up during the subsequent compression, whereas after annealing treatment the second compression deformation proceeded by the initiation of the new twins rather than the growth of the prefromed ones for the diffusion segregation of Nd element in the twin grainboudary during annealing process.