This paper investigates the influence of Ag element on the microstructure and mechanical properties, as well as the synergistic strengthening and toughening mechanisms of the Mg-8Gd-0.8Y-0.5Zn-0.3Zr alloy. The study shows that the addition of 0.1 wt% Ag increases the yield strength, ultimate tensile strength, and elongation to 225 MPa, 338 MPa, and 16.5%, respectively, which are 25%, 14%, and 73% higher compared to the Ag-free alloy. The introduction of Ag increases the aspect ratio of nanoscale precipitates β′ phases from 4.4:1 to 6:1, enhancing the ability of dislocation pinning and thereby improving the alloy's strength. Moreover, Ag addition can reduce the volume fraction of 18R-LPSO phases, increases the numbers of I1 (ABCB) and I2 (ABCA) stacking faults, and particularly enhancing the activation of slip systems, thus promoting the alloy's ductility.