Various reactions and the in-situ formation of new phases can occur during the mechanical alloying process. In the present study, Al powders were strengthened by AlN, using the in-situ processing technique during mechanical alloying. Differential thermal analysis and X-ray diffraction studies were carried out in order to examine the formation behavior of AlN. It was found that the precursors of AlN were formed in the Al powders and transformed to AlN at temperatures above 600oC. The hot extrusion process was utilized to consolidate the composite powders. The composite powders were canned in an Al can and then extruded at elevated temperatures. The microstructure of the extrusions was examined by SEM and TEM. In order to investigate the mechanical properties of the extrusions, compression tests and hardness measurements were carried out. It was found that the mechanical properties and the thermal stability of the Al/AlN composites were significantly greater than those of conventional Al matrix composites.