Highlights •Er effectively refined α-Al secondary dendrite spacing form 30–60 µm to 10–20 µm, it also reduced the length of Al3Fe flakes form 10–20 µm to 3–7 µm.•A large number of nano-sized Al3Fe with different shapes and spherical Al3Er exist in α-Al matrix at the cooling rate of about 4 °C/s. The L12-structured Al3Er which is coherent with the matrix is a perfect heterogeneous nucleation core of α-Al, which refines the grain size of α-Al.•The Al10Fe2Er phase can be formed in as-cast Al-2Fe alloy with Er>0.3%, and it will not disappear but grow up during annealing. The Al10Fe2Er phase can also be formed around the eutectic Al3Fe phase during annealing at 480 °C for 24h in Al-2Fe alloy with Er<0.3%.