An extruded Mg-6Gd-3Y alloy was processed by 6 passes of simple shear extrusion (SSE) at 553 K to refine the microstructure. The microstructural studies were performed through electron back-scattered diffraction (EBSD) and also transmission electron microscopy (TEM) to investigate the microstructural features which emerged after SSE. It was revealed the SSE-processed alloy had a duplex microstructure containing both fine dynamically recrystallized (DRX) grains and some large deformed grains. A relatively high fraction of low angle grain boundaries (LAGBs), induced within the un-DRXed deformed grains, was identified by EBSD results. TEM studies revealed the formation of round Mg5Gd-type nano-particles through dynamic precipitation only in the DRXed regions of microstructure in the SSE-processed alloy. Compressive mechanical properties and strain hardening behavior of the alloys were assessed by compression testing of both alloys at room temperature. SSE processing resulted in enhanced yield stress and reduced ductility. Both the extruded and SSE-processed alloys exhibited a three-stage strain hardening behavior with a much more pronounced stage II of hardening in the latter one. According to the mechanical properties results, there was a noticeable difference in the strain hardening rate and also dislocation storage rate of the extruded and SSE-processed alloys. This discernible strain hardening behavior of the two alloys was attributed to the formation of fine DRXed grains, dynamic precipitation of nano-sized Mg5Gd particles, and induction of LAGBs, which emerged after SSE.