Nanocrystalline Al-5vol%Al2O3 nanocomposite was synthesised by mechanical milling of a mixture containing nanometric alumina with an average particle size of 35 nm. Morphology of as-synthesised powder was investigated by SEM while crystallite size of Al matrix was determined by XRD analysis. The results confirmed formation of nanocrystalline Al matrix induced by severe plastic deformation during mechanical milling. Nanocomposite bars were produced by hot powder extrusion route. TEM investigation of as-extruded nanocomposite revealed formation of elongated grains along the extrusion direction decorated by alumina nanoparticles. Tensile and compressive properties of as-extruded nanocomposite were measured and compared with those of monolithic Al. The results show a significant increase in the strength of Al due to ultrafine-grained structure coupled with the nanoparticles induced strengthening mechanisms.