In this study, ultrafine-grained Mg-Zn-Y-Zr alloys were obtained via a novel extrusion-shearing (ES) deformation process, which combined initial forward extrusion with subsequent shearing. The experimental results showed that the composition of the main phase was converted from the alpha-Mg, I (Mg3Zn6Y), and W (Mg3Zn3Y2) phases to the alpha-Mg and W phases as the Zn/Y mass ratio of the as-cast alloys decreased from 4 to 0.67. Needle-shaped YZn5 and micron-sized Mg7Zn3 phases were also observed in the as-homogenized Mg-4Zn-1Y-0.6Zr and Mg-3Zn-2Y-0.6Zr alloys. The quantitative electron backscatter diffraction results demonstrated that the dynamic recrystallization (DRX) and the growth of fine DRX grains had a strong dependence on the equivalent strain and increased temperature caused by the die corner. The abundance of W precipitates resulted in the gradual evolution of the sub-grains into fresh DRX grains for the ES alloy III. Additionally, reduced strength anisotropies were related to the decreased pole density caused by the increasing addition of Y; a weakened basal texture with a rare-earth texture component was also achieved at 3 wt% of Y addition. Finally, the influences of the grain size and basal texture on the ductility and strength of the ES alloys were systematically investigated.