A high-performance extruded Mg96Gd3Zn0.5Ni0.5 alloy containing 14H LPSO phases and two different dynamic recrystallization (DRX) grains was successfully fabricated, which exhibited superior ultimate tensile strength (400 MPa) and outstanding elongation (20%). Meanwhile, the results show that the substitution of 0.5 at.% Zn with Ni element can refine the grain size of as-cast Mg96Gd3Zn1 alloy significantly. While limited 14H LPSO lamellae are formed near the block 14H LPSO phases due to Ni addition during solution treatment, copious 14H LPSO lamellae induced by external force are precipitated in alpha-Mg matrix after subsequent hot extrusion in the Mg96Gd3Zn0.5Ni0.5 alloy. Furthermore, two different DRX phenomena are successively stimulated with increasing deformation strain. Discontinuous DRX emerges first at the interface of block 14H LPSO phases, and then continuous DRX occurs in the kink bands of 14H LPSO lamellae. The precipitation behaviors of 14H LPSO lamellae and two types of DRX grains contribute to the excellent mechanical properties.