Powder Bed Fusion-Laser Beam (PBF-LB) processing of magnesium (Mg) alloys is gaining increasing attention due to the possibility of producing complex biodegradable implants for improved healing of large bone defects. However, the understanding of the correlation between the PBF-LB process parameters and the microstructure formed in Mg alloys remains limited. Thus, the purpose of this study was to enhance the understanding of the effect of the PBF-LB process parameters on the microstructure of Mg alloys by investigating the applicability of computational thermodynamic modelling and verifying the results experimentally. Thus, PBF-LB process parameters were optimized for a Mg WE43 alloy (Mg-Y-3.(9wt%)-Nd-3wt%-Zr-0.5wt%) on a commercially available machine. Two sets of process parameters successfully produced sample densities >99.4%. Thermodynamic computations based on the Calphad method were employed to predict the phases present in the processed material. Phases experimentally established for both processing parameters included alpha-Mg, Y2O3, Mg3Nd, Mg24Y5 and hcp-Zr. Phases alpha-Mg, Mg24Y5 and hcp-Zr were also predicted by the calculations. In conclusion, the extent of the applicability of thermodynamic modeling was shown, and the understanding of the correlation between the PBF-LB process parameters and the formed microstructure was enhanced, thus increasing the viability of the PBF-LB process for Mg alloys.