The effects of rare earth (RE) on the microstructures and properties of high carbon high speed steel (HCHSS) were investigated. The results show that when suitable RE is added to the HCHSS, the effect of RE on the austenite and eutectic carbides is obvious. The austenite grain and coarse eutectic structure are refined, and flake carbides in the eutectic structures become short and fine. After heat treatment, most of the eutectic carbides are spheroidized and distributed in a uniform manner. The hardness and red hardness of modified HCHSS are slightly increased; impact toughness is greatly increased by 37.81% and reaches 10.17 J/cm2. The mechanism by which RE improves the structures and properties of HCHSS is also analyzed.