Alumina-iron nanocomposite powders containing 5vol.% of iron were fabricated by high-energy ball milling with different ball-to-powder weight ratios (BPRs) as part of the study of ceramic-metal nanocomposite magnetic materials. The microstructure and morphology of the composite powders were characterized using the X-ray diffraction, optical microscopy and scanning electron microscopy. XRD analysis and SEM examination in combination with energy dispersive X-ray spectrometry confirmed that the nanocomposite structure of the powder particles formed only after 8 hours milling for both BPRs used. With a higher BPR of 16:1, Fe-Cr alloy material was broken from the stainless steel balls and incorporated into the nanocomposite powder. However, such a problem did not occur with a lower BPR of 5:1. The mechanism for formation of the alumina matrix nanocomposite powder is found to be dependent on BPR and milling time.