The present study is intended to comparatively investigate the changes in microstructure and tensile properties at room and elevated temperatures in commercial AM50(Mg-5%Al-0.3%Mn) and 0.3 wt%CaO added ECO-AM50 alloys produced by permanent mould casting. The typical microstructure of AM50 alloy was distinctively characterized using two intermetallic compounds, β(Mg17Al12) and Al8Mn5, along with α-(Mg) matrix in an as-cast state. The addition of a small amount of CaO played a role in reducing dendrite cell size and quantity of the β phase in the AM50 alloy. It is interesting to note that the added CaO introduced a small amount of Al2Ca adjacent to the β compounds, and that inhomogeneous enrichment of elemental Ca was observed within the β phase. The ECO-AM50 alloy showed higher hardness and better YS and UTS at room temperature than did the AM50 alloy, which characteristics can be mainly ascribed to the finer-grained microstructure that originated from the CaO addition. At 175˚C, higher levels of YS and UTS and higher elongation were obtained for the ECO-AM50 alloy, demonstrating that even 0.3 wt%CaO addition can be beneficial in promoting the heat resistance of the AM50 alloy. The combinational contributions of enhanced thermal stability of the Ca-containing β phase and the introduction of a stable Al2Ca phase with high melting point are thought to be responsible for the improvement of the high temperature tensile properties in the ECO-AM50 alloy.