Ageing behavior of Mg–2Dy–0.5Zn alloy was investigated during isothermal ageing at 180°C. Two significant ageing peaks were observed at 36h and 80h, respectively. Examination of microstructure evolution during ageing revealed that 14H long period stacking ordered (LPSO) phase forms in the α-Mg matrix and its volume fraction increases, (Mg, Zn) x Dy particle phases precipitate and their size, distribution and amount vary, as ageing time increases. The LPSO strengthening and the precipitation strengthening are two main mechanisms responsible for the double-peak ageing behavior observed for the Mg–2Dy–0.5Zn alloy. The first ageing peak is mainly attributed to the precipitation strengthening of a large amount of the fine (Mg, Zn) x Dy particle phases. The second ageing peak arises mainly from the LPSO strengthening of a high volume fraction of the 14H LPSO phase.