Aluminium matrix composites (AMCs) were prepared by compocasting route by melting AA 1200 aluminium alloy in a stir casting furnace and adding 2, 4, 6 and 8 wt. % (weight percentage) of modified fly ash (FA). Modified FA was synthesized by treating FA with graphite and magnesium powder in the ratio of 1:1:2.5 at 650°C in nitrogen atmosphere. X-ray diffraction (XRD) analysis of modified FA showed peaks of MgO, MgO3Si, Mg2Si and SiC in addition to the peaks of SiO2, Al2O5Si and AlPO4 present in FA. Tapped density of the modified FA was found to be 0.69 g/cm3. Optical microscopy studies on the cast composites showed segregation of modified FA particles at the grain boundaries. Hardness measurement showed that the hardness of the composite increased with increase in the amount of modified FA. Pin-on-disc wear studies revealed that the wear rate of the composite increased with the increase in the amount modified FA. At 8 wt. % modified FA, the wear rate was found to decrease drastically. The increase in wear rate was correlated to the improper bonding between the particles and the matrix phase due to segregation of particles as confirmed by optical microscopy. The wear process was slowed down with increasing amount of reinforcement due to the prevalent abrasive wear mechanism as the particles dislodged during wear process.