In this study Mg10GdxNd alloys are investigated by nanoindentation hardness measurements in several material conditions. Mg10GdxNd alloys with an average coarse grain size of 500 μm were cast by permanent mold direct chill casting. Hardness values vary due to the inhomogeneous microstructure formed during the solidification process consisting of dendrite arms with preferred orientation direction. The effect of dissolving particles during solution heat treatment (T4) and isothermal ageing (T6) was observed to a different extent depending on Nd content. Isothermal ageing promotes a duplex microstructure of coarse β1 phase precipitates and regions containing much finer precipitates. Post processing by direct extrusion changes the microstructure dramatically to an average grain size of 15 μm. The microstructure after hot extrusion shows segregation of precipitates in the extrusion direction. Near this alignment of second phases hardness and plastic deformation differ from precipitates enriched in RE elements due to depleted regions of solid solution around them. This phenomenon is known from alloying element segregation to grain boundaries. Depending on the amount and location of second phases in the as-cast microstructure and degree of cold work, recrystallization leads to an inhomogeneous microstructure, consisting of fine grains (15 μm) and very fine grains, where second phases act as nuclei during the recrystallization process. Furthermore, mechanical testing (fatigue) causes an increase in dislocation density by work hardening and extensive twinning near the fractured surface. Here the hardening effect interferes with grain size strengthening.