Abstract Al-Al2O3 is a crucial encapsulation composite used in solar thermal storage systems. This study utilized Al and Al2O3 powders as raw materials, with Y2O3 serving as a sintering aid, to prepare Al-20Al2O3-xY2O3 composites (x = 0, 0.2, 0.4, 0.6, 0.8, 1.0 wt%) through the cold pressure sintering method. The latent heat, thermal conductivity, and bending strength of the Al-20Al2O3-xY2O3 composites were measured. The compatibility of the composites with Al-12 wt%Si alloys was analyzed. Furthermore, the relationships between thermophysical parameters, mechanical properties, compatibility, and microstructure were explored. The oxidation mechanism of Al and the wetting angle of the composites with Al-12Si were simulated using LAMMPS software. It was concluded that with an increase in Y2O3 content, the bending strength, thermal conductivity, and compatibility of the composites initially increased and then decreased. The Al-20Al2O3-0.2Y2O3 composite exhibited the least porosity, highest bending strength (76.32 MPa), and thermal conductivity (46.82 W/(m·K)). In compatibility testing, the diffusion distance of Si atoms was shortest (90 μm) in the Al-20Al2O3-0.2Y2O3 composite. Moreover, this composite had the largest wetting angle (88°) with the Al-12Si alloy, resulting in good compatibility between them.