The microstructure and Gd-rich phase evolution of as-cast AZ31-xGd (x=0, 1.5 wt.%, 2.0 wt.% and 2.5 wt.%) magnesium alloys during semi-solid isothermal heat treatment were investigated deeply in the present work. Results showed that the lamellar (Mg,Al)₃Gd phases transformed into the particle-like Al₂Gd phases in AZ31 magnesium alloys with Gd addition during semi-solid isothermal heat treatment, leading to yielding more spherical α-Mg grains. When Gd content is 2.0 wt. %, the size of semi-solid spherical grains reaches the minimum. The main mechanism of grain refinement lies in the remelting of dendritic branches as well as the auxiliary effect of a small number of Al₂Gd particles as grain refining inoculants. Meanwhile, Al₂Gd particles enriched at the solid-liquid interfaces can remarkably retard the growth rate of α-Mg grains. A reduction of deformation resistance has been successfully achieved in AZ31-2.0Gd magnesium alloy after semi-solid isothermal heat treatment, which shows a moderate compressive deformation resistance (230 MPa), comparing to the as-cast AZ31 magnesium alloy (280 MPa) and semi-solid AZ31 magnesium alloy (209 MPa).