Magnesium (Mg) alloys with high concentrations of Gd additions are known to exhibit high strength and good creep resistance at elevated temperatures. However, the main mechanisms including microstructural evolution and dislocation configurations for clarifying the low creep rates of Mg–Gd–Zr alloys are still controversial. The present work investigates the compressive creep behavior of both the sand-cast and peak-aged Mg–12Gd–0.4Zr (wt.%) alloys at a fixed temperature of 250 °C under the applied stress range of 60–100 and 80–120 MPa, respectively. It is revealed that β' and β'F precipitates distribute alternately forming precipitate chains in Mg–Gd–Zr alloys. Furthermore, β'+β'F precipitate chains led to the honeycomb-like structure in the sand-cast alloy during the creep process, improving its creep resistance to some extent. Nevertheless, weakly strengthening β1 precipitates occurred and detrimental β phases coarsened, which weakened the creep performance of the sand-cast alloy. However, the slight improvement of creep resistance in the peak-aged Mg–12Gd–0.4Zr alloy can be mainly attributed to the formation of precipitate-free zones (PFZs) and also the premature coarsening of β'+β'F precipitate chains. During creep, the cross slip of basal and prismatic dislocations become the dominant creep mechanism for the sand-cast alloys. By contrast, the cross-slip of basal dislocations and pyramidal dislocations is the dominant creep mechanism for the peak-aged alloys, which was arrested by precipitates then strengthening the creep resistance of peak-aged alloys.