In this work, the mechanism of WC formation during mechanical alloying and subsequent annealing of nickel, aluminum, tungsten, and graphite powder mixtures was investigated. X-ray diffraction was used to evaluate phase changes. Microstructural and morphological evaluations of the powders were examined by FESEM and TEM. The XRD results confirmed that phase changes occurred by increasing milling time. After 10 h of ball milling, NiAl and W2C phases formed and new tungsten carbides were synthesized by increasing of milling time. After 40 h, W was consumed completely and WC, WC1-x, W2C carbides along with NiAl were produced. After heat treatment of 40 h milled powder, W2C and WC1-x phases disappeared and NiAl/WC nanocomposite was formed. The results confirmed that the WC formation was a gradual reaction controlled by atomic diffusion.