Phase separation arises from the substitution of Y in Zr _70-xAl _12.5Fe _17.5Y _x (x = 0–25 at.%) metallic glasses (MGs), resulting in the formation of nano-amorphous domains within a glassy matrix. The glasses with x ≥ 10 show a typical liquid phase separation-induced two-glassy phase (Zr-rich and Y-rich) morphology with droplet-like microstructures (nano-amorphous domains). The size of the domains increases with increasing Y addition. Atom probe tomography (APT) analysis confirms the formation of nanometer-sized Y-enriched clusters for x = 15 and 20. The effect of microstructural variation due to phase separation on the mechanical properties was studied using micro- and nano-indentation techniques. The micro-hardness and nano-hardness are found to be in the range of 4.58–5.73 GPa and 5.22–6.11 GPa for the alloys with x = 0–25. The hardness and elastic modulus decrease gradually with the increase in Y content. The Zr-based MGs exhibit Young's moduli in the range of 81–91 GPa, which are lower than that of Co–Cr–Mo, 316L SS and Ti–6Al–4V commercial implant alloys. Evaluation of the cytocompatibility of the MG ribbons reveals high metabolic activity and well-spread human gingival fibroblast (HGF) cells on the surface of x = 10 and 15 samples. Thus, the two glassy-phase Zr-based MGs free of toxic elements (Ni and Cu) exhibit suitable mechanical properties and biocompatibility, making them strong contenders for use in implant applications.