The effects of acidity and pore properties of rare earth modified USY on heavy oil conversion were investigated. USY with varied rare earth contents were prepared with impregnation method. FCC catalysts were also prepared with modified USY and tested by micro activity tests (MAT) and advanced catalytic evaluation (ACE). The results showed that USY3 had a good performance in cracking polycyclic hydrocarbons in heavy oil and diesel to aromatics and iso-olefins that exist in gasoline; the surface area and pore volume of USY3 increased by 54 m2/g and 0.032 ml/g, respectively, after porosity cleaning; the new optimized FCC catalysts improved the cracking of polycyclic aromatic hydrocarbons (PAHs) to form gasoline with high octane numbers. When tested on a pilot riser unit at 500 °C and 1.89 s with a catalyst-to-oil ratio of 5.6, the new catalyst Cat-3 had a 0.24 % higher propylene yield and a 1.52 % higher liquid yield compared with the reference catalyst Cat-1. However, it had a 7.89 % lower olefin content in FCC gasoline with the same octane numbers.