In this study, Fe, Al and TiO2 powder mixture with molar ratio of 6:7:3 was mechanically alloyed to produce (Fe,Ti)3Al-Al2O3 nanocomposite powder containing 40 vol.% Al2O3. The structural evolution and morphological changes of powder particles during mechanical alloying were studied by X-ray diffractometery (XRD) and scanning electron microscopy (SEM) analysis. It was found that at early stages of milling, TiO2 gradually reacted by Al and as a result crystalline Ti and amorphous Al2O3 phases formed. Further milling led to the dissolution of Ti and remaining Al into Fe lattice and therefore formation of Fe(Al,Ti) solid solution. This structure transformed to (Fe,Ti)3Al intermetallic compound with disordered DO3 structure at longer milling times. Heat treatment of this structure at 900º C for 1h led to the crystallization of Al2O3 and ordering of (Fe,Ti)3Al phases. The crystallite size of (Fe,Ti)3Al and Al2O3 phases after heat treatment were about 70 and 55 nm respectively.