Aluminu-matrix composites produced by Ni3Al intermetallic particles are increasingly used in aerospace and structural applications because of their outstanding properties. In manufacturing of metal-matrix composites using powder metallurgy blending and milling are important factors. They control the final distribution of reinforcement particles and porosity in green compacts which in turn, strongly affect the mechanical properties of the produced PM materials. This paper studies different conditions for producing composite powders with uniform dispersion of Ni3Al particles in aluminum powders and improved physical and mechanical properties. The results indicated that an intermediate milling time for fabrication of composite powder, better than prolonged and shortened ones, causes better microstructure and properties. It was shown that addition of 5 vol.% Ni3Al particles, produced by 15 h mechanical alloying to aluminum powders, and then 12 h blending operation provides an appropriate condition for producing Al-Ni3Al composite powder.