Aluminum alloys were reinforced with AlN particles using a novel chemical in situ technique. Thermodynamic analyses were made to identify the conditions for the in situ formation of the AlN in Al alloys. Experiments were conducted in the temperature range of 1173-1473 K by injecting ammonia gas. The composites with AlN quantity varying from 5 to 51 wt % were produced. Effect of process variables such as gas injection time, flow rate of ammonia gas and temperature of the alloy melt on the formation of AlN was studied. Increase in either injection time or flow rate of the ammonia gas increased the nitride content. AlN particles with an average size of 500 nm were produced. The measured Vickers hardness of the composites formed increased with increasing AlN content. The amount of AlN experimentally formed is in good agreement with the thermodynamically predicted data.