Abstract: High-entropy magnetocaloric alloys offer exceptional compositional flexibility and stability for magnetic refrigeration. However, enhancing their magnetic entropy change, working temperature range, and refrigeration capacity remains challenging. In this study, we demonstrate that microalloying GdTbDyHo with only 0.4at% nonmagnetic Y effectively addresses this limitation. Our analysis indicates that Y uniformly dissolves into the hexagonal matrix lattice, disrupting the 4f–4f exchange interactions and inducing a local short-range order. This weakens the antiferromagnetic coupling, accelerates the antiferromagnetic–ferromagnetic transition, and broadens its range. Consequently, the peak magnetic entropy change increases from 8.2 to 8.7 J·kg⁻¹·K⁻¹, the working temperature range expands from 77 to 89 K, and the refrigeration capacity improves by 23%, reaching 774 J·kg⁻¹ (5 T) relative to the Y-free alloy, while the Néel temperature remains constant (~195 K). This study establishes nonmagnetic microalloying as a cost-effective and scalable strategy for designing high-performance magnetocaloric materials.