The influence of the microstructure on mechanical properties and corrosion behavior of the Mg–1.21Li–1.12Ca–1Y alloy was investigated using OM, SEM, XRD, EPMA, EDS, tensile tests and corrosion measurements. The results demonstrated that the microstructure of the Mg–1.21Li–1.12Ca–1Y alloy was characterized by α-Mg substrate and intermetallic compounds Mg2Ca and Mg24Y5. Most of the fine Mg2Ca particles for the as-cast alloy were distributed along the grain boundaries, while for the as-extruded along the extrusion direction. The Mg24Y5 particles with a larger size than the Mg2Ca particles were positioned inside the grains. The mechanical properties of Mg–1.21Li–1.12Ca–1Y alloy were improved by the grain refinement and dispersion strengthening. Corrosion pits initiated at the α-Mg matrix neighboring the Mg2Ca particles and subsequently the alloy exhibited general corrosion and filiform corrosion as the corrosion product layer of Mg(OH)2 and MgCO3 became compact and thick.