Abstract: The techniques such as NH3-TPD, FT-IR, XRD were used to investigate the acid properties and hydrothermal stability of zeolite Y modified with rare earth and phosphorus (P-RE-USY), and the catalyst using P-RE-USY as an active component was evaluated in a small confined fluidized bed apparatus. The results have shown that P-RE-USY has good hydrothermal stability owing to the migration of hydroxy rare earth cation from the super cages to the sodalite cages enhanced by phosphorus addition, inhibiting the framework dealumination of zeolite in the steaming condition. The acid distribution of P-RE-USY is more concentrated in the range of intermediate and strong acidity, improving the hydrogen transfer activity. The reduction of strong acid decreases the formation of coke. The catalyst containing P-RE-USY exhibits excellent performance of reducing naphtha olefins, increasing diesel yield more than 2.31%.