In this work MmNi(3.5)(CoMnAl)(1.5) and Mg were mechanically alloyed to prepare composite hydrogen storage alloys. The microstructural variation of the alloy resulted from the mechanical alloying was characterized by X-ray diffraction, SEM and TEM analysis. It was found that solid state reaction occurred between MmNi(3.5)(CoMnAl)(1.5) and Mg components, resulting in Mm(2)Mg(17) phase formation. The alloy obtained by ball milling contains homogeneously distributed Mg, MmNi(3.5)(CoMnAl)(1.5) and Mm(2)Mg(17) phases of nanometer size. It was also found that Mg2Ni was formed after the mechanically alloyed samples were annealed. The mechanism of the reaction has been proposed based on the estimation of the heat of formation using Miedema's theory and is in accordance with the experiment result of lattice constant measurement of ball milled sample and its structure variation during annealing. (C) 2003 Kluwer Academic Publishers.