Mg based Mg-Rare earth (RE) hydrogen storage nano-composites were prepared through an arc plasma method and their composition, phase components, microstructure and hydrogen sorption properties were carefully investigated. It is shown that the Mg-RE composites have special metal-oxide type core shell structure, that is, ultrafine Mg(RE) particles are covered by nano-sized MgO and RE2O3. In comparison to pure Mg powders prepared using the same method, the hydrogen absorption kinetics can be significantly improved through minor addition of RE to Mg. In addition, the Mg-RE composite powders show better anti-oxidation ability than pure Mg powders, resulting in the increased hydrogen storage capacity of Mg-RE powders over pure Mg powders. In particular, the hydrogenation enthalpy can be increased and the dehydriding temperature can be reduced through minor addition of Er. The experimental results show that both the RE in solid solution state in Mg and the RE2O3 nano-grains covered on Mg particles contribute to the improved hydrogen storage thermodynamic, kinetic and anti-oxidation properties of Mg ultrafine particles. Copyright (C) 2012, Hydrogen Energy Publications, LLC. Published by Elsevier Ltd. All rights reserved.