The invention provides an Mg-Gd-Y alloy with high strength and ductility and heat resistance and suitable for low pressure casting and a preparation method thereof. The Mg-Gd-Y alloy is prepared fromthe chemical components in percentage by mass: 3.0% to 7.0% of RE, 1.2% to 4.2% of Zn, 0.5% to 1.2% of Al, 0.1% to 0.3% of Mn, 0.01% to 0.08% of M, and the balance of Mg; and M is one or two elementsin Ti and B. The prepared method includes the steps that (1) a material is prepared according to Mg-Gd-Y alloy components; (2) an industrial pure magnesium ingot is melted; (3) a temperature rises to700 DEG C, and industrial pure zinc, and Mg-Gd, Mg-Y and Mg-Mn intermediate alloys are melted; (4) the temperature rises to 730 DEG C, an industrial pure aluminium ingot, and Al-Ti, Al-Ti-B, and Al-Bintermediate alloys are added and all melted, and then magnesium alloy fondant is obtained though refining; (5) low pressure casting is conducted; and (6) second-level solution treatment and artificial aging treatment are conducted. After the Mg-Gd-Y alloy with the high strength and ductility and heat resistance and suitable for low pressure casting is subjected to low pressure casting, second-level solution treatment and artificial aging treatment, indoor temperature extension strength reaches 307 Mpa, and ductility is 17%; and high temperature tensile extension strength at 200 DEG C reaches216 Mpa, ductility is 23%, and the high-end needs of industries of aerospace, automobiles and the like for light weight development are met.