A new process, sheathed powder compaction (SPC), was proposed to fabricate hybrid metallic composite samples at room temperature. The process involves densification of fine powder in an annulus sheath under combined moderate pressure and shear. Hybrid samples of copper annular with aluminum powder were produced to demonstrate the merits of the process. The fabricated samples were characterized and explored using electron microscopy, micro hardness, micro shear punch tests and density ratio measurements. Comparing "shear punch response" of the samples in the Al region with those of commercially pure aluminum and Al 5005-H34 samples showed an excellent shearing strength in the region. The electron backscatter diffraction analyses and scanning electron microscopy observations suggested that the substantially enhanced strength was facilitated by a significant SPC induced grain refinement. Moreover, the annular sheath (copper) also showed significant grain refinement due to the process. These demonstrated promising potentials of the SPC to manufacture hybrid metals with concurrent grain refinement at room temperature under moderate processing conditions.