The microstructure of ZK40, ZK40 with 2 wt% of Nd and Gd (ZK40-2Nd and ZK40-2Gd, respectively) were investigated with optical, scanning and transmission electron microscopy, X-ray diffraction and Scanning Kelvin Probe Force Microscopy. The mechanical properties and the corrosion behaviour were correlated with the microstructure. The 2 wt% Gd addition enhanced the ductility, while the Nd addition resulted in deterioration in mechanical properties. The corrosion behaviour was also enhanced with the addition of Gd.