Mg–Zn–Y alloy has become the favorite of magnesium alloy research due to its excellent comprehensive performance and increasingly mature deformation process. For the gas tungsten arc welding (GTAW) process of ZW61 magnesium alloy thin plates, the physical field and microstructure evolution is simulated with the finite volume method and the cellular automata (CA) method in this paper. The flow field results show that the Marangoni force dominates the flow of liquid metal in the molten pool from the center of the molten pool to the edge of the molten pool. The increase in welding speed significantly increases the temperature gradient in the molten pool. In addition, from the results of the stress field, the residual stresses are mainly distributed in the fusion zone (FZ) and heat-affected zone (HAZ). The maximum longitudinal residual stress occurs in the HAZ, about 82 MPa. While the maximum transverse residual stress occurs at the end of the plate, about 104 MPa. Neither exceeds the tensile strength of ZW61 alloy, so no cracks appear in the joint. The temperature gradient of the welded plate and the solidification rate of the molten metal in the molten pool are regulated by adjusting the welding process parameters, to improve the microstructure in the FZ. The minimum average grain size of the FZ is only 29.50 μm under the optimum welding process conditions set in this paper.