The Mg–Gd–Y–Zn–Zr alloy containing a long period stacking ordered (LPSO) phase was subjected to multi-pass deformation by means of a multi-directional forging process, and the microstructure evolution and the influence of the LPSO phase on its dynamic recrystallization (DRX) were studied. The results showed that multi-directional forging can effectively refine the grain with the DRX fraction increased, and DRXed grains lead to the decrease of the texture intensity, which can significantly improve the mechanical properties of the alloy. The different morphologies of the LPSO phase have different degrees of promotion relative to DRX behavior. The lamellar LPSO phase with kinks promoted dislocation plugging, where there could be a potential nucleation site for DRX grains. The fragmented lamellar LPSO phase promoted the DRX process through the particle-stimulated nucleation mechanism, and the block-shaped phase was more prone to stress concentration, which promoted DRX. These effects resulted in continuous grain refinement and a more uniform microstructure.