The initiation of dynamic recrystallization during hot deformation, its kinetics according to the Johnson–Mehl–Avrami–Kolmogorov model, and the resultant grain refinement in the Mg-3Gd-1Zn magnesium alloy were studied to elucidate the mechanism of dynamic recrystallization and the opportunities it offers during high-temperature thermomechanical processing of this heat resistant light alloy. The necklace mechanism was found to be responsible for the noticeable grain refinement, during which the mean recrystallized grain size varied slightly. These results were further confirmed based on the kinetics analysis.