Nanocrystalline AZ61 powders, dispersed with submicron/nanometer Ti particulates, were mechanically milled and a comparative study on thermal stability and mechanical properties was performed. After mechanical milling, Ti dispersions were cracked to submicron/nanometer particulates and Mg grains were refined to nanocrystalline. As illustrated by high-resolution transmission electron microscopy, coherent lattice and semi-coherent lattice interfaces between magnesium and titanium were achieved. Based on high angle annular dark field and corresponding energy dispersive spectrometer maps, Al dissolved into Ti particulates after mechanical milling. Moreover, the emergence of Ti3Al phase was verified by X-ray diffraction during mechanical milling and heat treatment. According to heat treatment results, this nanocrystalline magnesium composite exhibits a preeminent thermal stability among nano-structured magnesium alloys. After annealed at 673K for 600min, the composite still remained nanocrystalline with average grain size being 68.6nm. Due to such microstructure, the composite revealed prominent mechanical property with the hardness being 146.6HV. Simultaneously, the hardness of annealed composite remained high, with the value being 134.7HV, which could ascribe to the excellent thermal stability.