The milling processes were performed for starting powder mixture of composition Fe2O3 + 4 Al in order to study the phase transformations leading to the "in situ" formation of a composite 2 FeAl + Al2O3. Fritsch and Spex ball mills were applied for the experiments. For the process conducted in a Fritsch mill the reduction reaction of hematite takes place after 20 h of milling. However, the reaction product, beside Al2O3, is not ordered FeAl intermetallic compound, but disordered bcc Fe(Al) solid solution, characterized by mean crystallite size of 10 nm and lattice parameter of 0.2931 nm. Heating this sample in the DSC results in the ordering process and formation of FeAl intermetallic compound with mean crystallite size of 40-50 nm. The TEM observations show that the size of crystallites inside the powder particles is not uniform, changing from several tens of nanometers to a few hundreds of nanometers. In the case of milling experiment performed in a Spex mill, the reduction reaction of hematite occurs already after 30 min. of processing. The obtained disordered bcc Fe(Al) solid solution is characterized by similar values of average crystallite size and lattice parameter as the one formed during milling in a Fritsch device, however the processing time is much shorter.