A new approach for in-situ synthesis of nano-HfO2 reinforced NiAl intermetallics was proposed for the preparation of a new NiAl-based composite material that is expected to function at 1200 °C. The phase composition, microstructure and mechanical properties of NiAl-HfO2 composites prepared by hot pressing sintering with Ni, Al, Hf and O2 as starting materials were studied. The composites with NiAl as the matrix and nearly spherical or capsule-shaped HfO2 with an average size of 80.19 nm as the dispersion strengthening phase were designed and prepared. The results indicated that the addition of HfO2 significantly increased the high-temperature strength and slightly improved the room-temperature plasticity of the NiAl matrix due to the design of the appropriate content, size and distribution of HfO2. The NiAl-9HfO2 (in wt.%) exhibited the most excellent mechanical properties with the compressive yield strength of 351.1 MPa at 1200 °C as well as the compressive yield strength of 1316.8 MPa and ultimate compression deformation of 25.8% at room temperature. The strengthening and toughening mechanisms of HfO2 on NiAl matrix were discussed in details, and the Orowan strengthening mechanism was emphasized.