Semi-solid feedstock of AZ80 magnesium alloy modified by minor rare-earth Y element (0, 0.2, 0.4, 0.8 wt.%) were fabricated by strain induces melting activated (SIMA) in the form of extrusion and partial remelting. The effect of Y addition on the microstructure evolution of extruded and isothermal treated alloy was observed by optical microscope (OM), scanning electron microscope (SEM), X-ray diffraction (XRD) and quantitative analysis. The results show that the Y addition can refine the microstructure and make the β-Mg17Al12 phases agglomerating. During the subsequent isothermal treatment at 570℃, the average solid grain size, shape factor and liquid fractions increased with prolonged soaking time. Smaller spheroidal solid grains and the larger shape factor were obtained due to Y addition. The coalescence and Ostwald ripening of solid grains operated the coarsening process simultaneously. The coarsening rate constants of AZ80M1 (0.2 wt.% Y addition) of 164.22 μm3s-1 was approximately four times less than the un-modified AZ80 alloy of 689.44 μm3s-1. In contrast, the desirable semi-solid structure featured by fine, well globular solid grains and appropriate liquid fractions and shape factor was achieved in AZ80M1 alloy treated at 570℃ for 20-30 min.