Three Li- and Mg-cosubstituted compounds in the Gd5-x(Li/Mg)xGe4 (x = 1.04(2), 1.17(2), 1.53(2)) system have been successfully prepared by conventional high-temperature reactions. According to powder and single-crystal X-ray diffraction analyses, all three compounds adopt a Gd5Si4-type phase with the orthorhombic Pnma space group (Pearson code oP16, Z = 4) and six crystallographically independent atomic sites. The crystal structure can be described as a combination of two-dimensional Mo2FeB2-type ∞2[Gd2(Li/Mg)Ge2] layers and [Ge2] dimers. Interestingly, as 64% of Li and 26% of Gd at the RE3 and RE2 sites, respectively, were exclusively substituted by Mg in Gd3.47(1)Li0.36(2)Mg1.17(3)Ge4, the lattice parameter b was selectively shortened as a result of the RE3-Ge1 bond shrinkage in comparison to that in Gd4LiGe4, while lattice parameters a and c remained nearly intact. A series of theoretical calculations using the tight-binding linear muffin-tin orbital (TB-LMTO) method indicated that the reduction of the particular RE3-Ge1 bond distance in the title compounds could also be explained by an optimization of bonding based on the corresponding RE3-Ge1 crystal orbital Hamilton population (COHP) curve. Moreover, the specific site preference of Mg for the RE3 site was supported by both size-factor as well as electronic-factor criteria on the basis of the smallest atomic size and the highest electronegativity of Mg among the three cations. Therefore, the overall electronic structure was further interrogated by a density of states (DOS) analysis. The influence of nonmagnetic Li/Mg cosubstitution for the magnetic Gd atoms in the title Gd5-x(Li/Mg)xGe4 system on the magnetic characteristics was also thoroughly studied by isofield magnetization at 100 Oe and 10 kOe and isothermal magnetization measurements at 4 K using two of the title compounds: Gd3.83(1)Li0.48Mg0.69(3)Ge4 and Gd3.47(1)Li0.36(2)Mg1.17(3)Ge4.