Aluminum nitride (AlN) possesses superior thermal and electrical properties and is an ideal candidate for high-temperature, as well as for packaging and optoelectronic applications. Aluminum based composites reinforced with AlN have been manufactured via an in situ gas-assisted process, where nitrogen gas is injected in the molten aluminum at 1273-1323 K. The process is carried out in an inert atmosphere in order to avoid oxygen contamination. Addition of Mg lowered the oxygen content in the melt by forming MgO and thus favoring the nitridation reaction. The reinforcement phase has been detected throughout the casting in two morphologies: pockets of powders and embedded in the microstructure. Particle size formed in the matrix varied from 1- 3 µm to sub-micron scale.