Pd-capped Mg78Y22 thin films have been prepared by direct current magnetron co-sputtering system at different substrate temperatures and their electrochemical hydrogen storage properties have been investigated. It is found that rising substrate temperature to 60 °C can coarsen the surface of thin film, thus facilitating the diffusion of hydrogen atoms and then enhancing its discharge capacity to ~1725 mAh·g−1. Simultaneously, the cyclic stability is effectively improved due to the increased adhesion force between film and substrate as a function of temperature. In addition, the specimen exhibits a very long and flat discharge plateau at about −0.67 V, at which nearly 60% of capacity is maintained. The property is favorable for the application in metal hydride/nickel secondary batteries. The results indicate that rising optimal substrate temperature has a beneficial effect on the electrochemical hydrogen storage of Mg-Y thin films.