Studies were carried out on microstructure evolution and mechanical behavior of an Al matrix–nanoscale Al2O3 particulate-reinforced composite. The thermal stability of the composite, evaluated by heat treating specimens at temperatures from 300 to 600 °C for times varying from 1 to 100 hours, revealed that the nano-sized (30-100 nm) Al2O3 particles present in the as-received/ascast material coalesced into larger particles, but with sizes still in the 100 to 500 nm range. Despite the coarsening of the particles, high hardness was retained. The tensile properties of both the as-cast DSC material and those thermally soaked for 500 hours at a number of temperatures were evaluated. The results showed that the yield strength was quite high (283 MPa) at room temperature and decreased nearly linearly with temperature, though values as high as 110 MPa were obtained at 400oC. Thermal soaking did not have a detrimental effect on strength. Although the macroscopic ductility of both unsoaked and soaked materials remained quite low over the entire temperature range, SEM observations of the fracture surfaces provided substantial evidence for high localized plasticity as manifested by stretching, tearing and void formation in the Al matrix around the oxide particles. Possible strengthening mechanisms, including grain size reduction, Orowan bypass and forest hardening, were considered and modeled. Good agreement between the calculated and experimental strengths was obtained, and majority of the strengthening at room temperature was found to come from forest hardening (i.e, increase in dislocation density caused by the thermal expansion mismatch between Al and Al2O3), with secondary contributions from the Orowan mechanism. TEM observations provided confirmatory evidence for these mechanisms. The decrease in strength at higher temperatures was attributed to a diminishing contribution from forest hardening due to recovery processes.