Our previous studies have demonstrated that Mg-Zr-Sr alloys can be anticipated as excellent biodegradable implant materials for load-bearing applications. In general, rare earth elements (REEs) are widely used in magnesium (Mg) alloys with the aim of enhancing the mechanical properties of Mg-based alloys. In this study, the REE holmium (Ho) was added to an Mg-1Zr-2Sr alloy at different concentrations of Mg1Zr2SrxHo alloys (x = 0, 1, 3, 5 wt. %) and the microstructure, mechanical properties, degradation behaviour and biocompatibility of the alloys were systematically investigated. The results indicate that the addition of Ho to Mg1Zr2Sr led to the formation of the intermetallic phases MgHo3, Mg2Ho and Mg17Sr2 which resulted in enhanced mechanical strength and decreased degradation rates of the Mg-Zr-Sr-Ho alloys. Furthermore, Ho addition (≤5 wt. %) to Mg-Zr-Sr alloys led to enhancement of cell adhesion and proliferation of osteoblast cells on the Mg-Zr-Sr-Ho alloys. The in vitro biodegradation and the biocompatibility of the Mg-Zr-Sr-Ho alloys were both influenced by the Ho concentration in the Mg alloys; Mg1Zr2Sr3Ho exhibited lower degradation rates than Mg1Zr2Sr and displayed the best biocompatibility compared with the other alloys.