An unexpected precipitate phase was observed in Mg-20 wt% Dy alloy, with a cuboid morphology not compatible with any shown in the Mg-Dy binary phase diagram. As observed by scanning electron microscopy and energy-dispersive X-ray analysis, the ratio of atomic percent of Dy to Mg is very high in these particles, probably largely because of the poor spatial resolution of that technique but already showing the mismatch with any previously characterized Mg-Dy compound. High-brilliance synchrotron diffraction and transmission electron microscopy experiments confirmed that these particles are composed of DyH2. They are formed during sample preparation at room temperature when hydrogen-containing sources such as water are used.