Both Al₂O₃ and SiO₂ nanopowders were ball-milled to break large agglomerates(500nm~10μm). To improve the dispersion of ball-milled nanoparticles in transformer oil, surface modification was performed with oleic acid(OA). The modified nanoparticles were examined by the particle size analyzer, electron microscope, Infrared spectroscopy and stability analyser. Particle Size distributions were measured for ball-milled particles, and the results were compared with the size distribution of primary particles. FTIR results indicated that hydrophobicity of modified nanoparticles was due to the chemical reaction between hydroxyl groups of particle surface and oleic acid. The dispersion stability of surface-modified nanoparticles was quite good in transformer oil.