The effects of rare earth element, erbium (Er) additions on the microstructure and mechanical properties of Al-15Zn-2.5Mg-2.5Cu alloy have been investigated. This new high strength alloy with erbium additions (0.5, 1.0, 1.5 and 2.0 wt%) was synthesized by liquid metallurgy route followed by hot extrusion. Microstructural characterization was performed using scanning electron microscope and electron probe microanalysis. Significant amount of grain refinement was observed with erbium addition in the hot extruded and heat treated alloy. Tensile test was performed to investigate the effect rare earth on mechanical behavior of alloy in as cast and hot extruded condition before and after T6 heat treatment. The combined effect of erbium addition, hot extrusion and heat treatment significantly enhanced the tensile strength of alloy (602 MPa) when compared to the as cast alloy without erbium addition (225 MPa). The strengthening of the alloy was attributed to grain refinement caused by erbium along with hot extrusion and formation of precipitates after T6 heat treatment. Fractograhic investigations revealed that the hot extruded alloy with erbium addition after heat treatment showed uniformly distributed deep dimples exhibiting ductile behavior.