A high-strength low-cost Mg–2.5Zn–0.3Ca–0.4La (mass%) alloy was fabricated by hot extrusion following direct-chill casting. Yield strength (YS), ultimate tensile strength (UTS) and elongation to failure of the alloy are 325MPa, 341MPa and 15%, respectively. The high strength of the extruded Mg–2.5Zn–0.3Ca–0.4La alloy is mainly due to grain refinement, dense precipitation and high density of dislocations. The extruded alloy exhibits a bimodal microstructure containing fine dynamic recrystallized (DRXed) grains and deformed regions. High density of dislocations is stored in the deformed regions while dense precipitates are homogeneously distributed in both the DRXed grains and the deformed regions. However, precipitates in the DRXed regions show in spherical shape only, while they are in rod-like shape and spherical shape in the deformed regions.