The effects of 2 wt% Sn on the microstructures and the mechanical properties of the die-cast Mg-7Al alloy and the solution-treated alloy were studied by optical microscope (OM), scanning electron microscopy (SEM), energy dispersive spectrometer (EDS), X-ray diffraction (XRD), differential scanning calorimetry (DSC) and tensile tests. The results show that after 2 wt% Sn is added into the Mg-7Al alloys, the grains are refined, the growth of Mg17Al12 phase is suppressed and a few dispersed Mg2Sn particles with granular morphology are formed. After solution treatment the second phases of Mg-7Al alloys drastically decrease while fine granular Mg2Sn phases are still on the AT72 alloy matrix. AT72 alloy exhibits better tensile properties at both room and elevated temperature than Mg-7Al alloys due to the refinement of grains, increase of second phases, optimum morphology of Mg17Al12 and precipitation of Mg2Sn with better thermodynamic properties. The mechanical properties are improved after solid-solution treatment, which is attributed to solid-solution strengthening and dispersion strengthening. In addition, from the view of microscopic theory, the effect of Sn on the improvement of the mechanical properties of Mg-7Al alloy at elevated temperatures was discussed by first-principle calculation.