In this paper, rapid solidified Mg95Zn4.3Y0.7 (at.%) alloy powders produced by an inert gas atomizer were consolidated using a severe plastic deformation technique of high pressure torsion (HPT) at room temperature and 373 K. The behavior of powder consolidation, matrix microstructural evolution, and mechanical properties of the powders and compacts were investigated using X-ray diffraction, scanning electron microscopy, transmission electron microscopy, microhardness, and tensile testing. As the HPT processing temperature increases, the powders are more plastically deformed due to decreased deformation resistance, grain boundaries are more in equilibrium, powder bonding is enhanced due to increased interparticle diffusion, hence, tensile ductility and strength increases. On the other hand, hardness decreases with the increased processing temperature, due to less dislocation density.