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A high strength and ductile Mg-Gd-Y-Zn-Zr alloy was designed and fabricated. The local strain evolution of the alloys during plastic deformation was analyzed using high-resolution digital image correlation (DIC). The results showed that the β particles, nano-sized γ' phases, and LPSO phases were distributed in the as-extruded alloy and a bimodal microstructure was exhibited, including elongated un-dynamic recrystallized grains and fine dynamic recrystallized grains. With increasing extrusion ratio, the grain size remained, with the volume fraction of dynamic recrystallization of the as-extruded alloy increasing from 30% to 75%, and the as-extruded alloy exhibited a high strength-ductility synergy, which is attributed to the grain refinement, extensive β particles, and elongated block-shaped LPSO phases. The strain evolution analysis showed that a strain-transfer from un-DRXed regions to adjacent DRXed regions and LPSO phases can promote uniform plastic deformation, which tends to improve the ductility of the alloy.