The combined effect of forging and aging on microstructural evolution and mechanical properties of a Mg–Y–RE alloy was studied in the present work by employing hardness measurements, tensile tests, optical microscopy (OM), scanning electron microscopy (SEM) and electron back scattered diffraction (EBSD) analysis. The -F temper treated bulk Mg–Y–RE alloy samples were subjected to forging for microstructural refinement and subsequent aging to maximize the strength-ductility combination. The forged samples combined with peak aging treatment (60 h at 180 °C) exhibited an excellent combination of high strength (388 MPa) and high ductility (23%). The combined effect of grain refinement, work hardening, precipitation strengthening and recovery is responsible for the simultaneous improvement of both strength and ductility. A comparative study of age hardening response of forged samples and as received samples showed higher hardenability in forged samples.