Previous work indicated that gamma-Al2O3 modified Al powder could react with water and generate hydrogen under ambient conditions. In this work, an ultrasonic dispersion procedure was used to disperse and mix the Al and gamma-Al2O3 powders. It was found that gamma-Al2O3 modified Al powder prepared by the ultrasonic procedure has a higher hydrogen-generation speed than that prepared by a traditional ball-milling method. Microstructure analyses showed that the ultrasonic procedure greatly eliminated the agglomeration of Al and gamma-Al2O3 powders so that gamma-Al2O3 grains covered Al particle surfaces more uniformly. This implies that a favorable processing procedure is the key to obtain high performance modified Al powder.