The paper reports phase evolution in mechanically driven Ag-15 at. pct Sn alloy powder starting with elemental powders in order to establish the feasibility of designing nanocomposites of a Ag-Sn solid solution. This alloy lies in the phase field of the hexagonal ζ-phase which is a well-known Hume-Rothery electron compound with an electron-to-atom ratio of about 1.45 and hexagonal crystal structure (a = 0.2966 nm, c = 0.4782 nm). Through a systematic use of X-ray diffraction and transmission electron microscopy, the results establish the formation of the ζ-phase which co-exists with the Ag solid solution during the initial phase of milling. Mechanical milling for long duration (55 hours) destabilizes the ζ-phase. A complete solid solution of Ag with a grain size of ~8 nm could be achieved after 60 hours of milling. Additional milling can induce decomposition of the solid solution that results in a reappearance of ζ-phase. We present a detailed thermodynamic calculation which indicates that complete Ag solid solution of the present alloy composition would be possible if the crystallites size can be reduced below a certain critical size. In particular, we show that both Ag and ζ-phase grain sizes need to be taken into account for determining the metastable equilibrium and the phase change that has been experimentally observed. Finally, we argue that recrystallization processes set a limit to the achievable size of the nanoparticles with metastable Ag solid solution.