Magnesium (Mg) alloy is gaining more interest because of its degradability and osteogenic potential. Still, it has some deficiencies, such as its rapid degradation rate, insufficient mechanical property. This research aimed to design a novel biodegradable Mg-argentum (Ag)-yttrium (Y) alloy, and Y was added to improve degradable and mechanical property. Mg-Ag-Y alloys were characterized for mechanical features, practicabilities in vitro and in vivo. The mechanical features results shown that this novel component was similar to native bone tissue in elastic moduli, tensile, and compressive stress. Then mesenchymal stem cells (MSCs) were seeded in alloys to assess cell toxicity in vitro. The results showed that its aqueous extract was suitable for MSCs adhesion and proliferation. Then the alloy was evaluated for biomedical applications in nonfractured distal femora of Sprague Dawley rats for 6 weeks, compared with those of pure-Mg and stainless steel groups. All rats survived, and hematological and histological evaluation showed no abnormal physiology 6 weeks postimplantation, and measurements of serum Mg concentration were within normal levels. X-ray scanning, microcomputed tomography, and histological examinations were performed to evaluate the degradability and osteogenic potential. The results indicated that the degradation rate of alloy was 0.91 mm per year, (range 0.77-1.22 mm), and pure-Mg 1.80 mm per year (1.43-2.26 mm). The new bone quantity was 3.18 mm (1.46-4.44 mm ) in Mg-Ag-Y alloys group, 1.39 mm (0.54-2.32 mm ) in pure-Mg group, and none in stainless steel group. These promising results suggest potential clinical application of Mg-Ag-Y alloys for use as resorbable bone fixation implant. © 2018 Wiley Periodicals, Inc. J Biomed Mater Res Part A: 106A: 2059-2069, 2018.