The microstructural changes of mechanically alloyed (MA) Al-Mg-Al₂O₃composite powders with the processing time were studied by using optical and transmission electron microscope. The mechanical properties and microstruotures of those P/M products con solidated by extrusion were also investigated at room and high temperatures. These composite powders were found to reach a steady state after 240-300 minutes of mechanical alloying process. Up to 120 minutes of processing time, the structural refinement rate of powders seems to follow the logarithmic relation with processing time given by ε= 3.68 ln (1 + 0.043t). After MA powders reach a steady state, the grain size of powders decreased steadily becoming less than 0.1㎛, while dislocations were rearranged to form low angle grain boundaries transforming into a lower state of strain energy. The combined effect of these two phenomena appears to lead into the saturation of hardness. In the case of extruded bar, Al₂O₃and A1₄C₃dispersoid, 10-20㎚ in diameter we e observed to disperse uniformly. The size of recrystallized grain seemed to be directly controlled by the amount of dispersoids. At higher temperature, however, only the Al₂O₃ particles pinned the grain boundaries. Accordingly grain size was smaller and grain boundary sliding was retarded providing a superior high temperature hardness as the amount of A1₂O₃increased.