Neodymium, a Rare Earth with low solid solubility in Mg is an ideal alloying element to improve the yield strength and creep resistance cost effectively. The addition of Zn achieves a further improvement; however, its influence on the intermetallic phases in the Mg–Nd–Zn ternary system is not yet fully understood. A Mg-5Nd alloy modified with 3, 5 and 7 wt% of Zn was investigated with in situ synchrotron radiation diffraction during cooling from the molten state to 200 °C in order to investigate the phase-formation and -transformation characteristics of the alloys. The synchrotron diffraction results have been complemented with TEM investigations on the as-solidified samples. The results suggest that Zn has a strong effect on the microstructure by stabilizing the Mg3Nd phase and accelerating the precipitation formation. The experimental results do not fully comply with the theoretical calculations, indicating the necessity of improving the thermodynamic databank for this alloy system.