Nickel particles were embedded into an Al matrix by friction stir processing (FSP) to produce metal particle reinforced composite. FSP resulted in uniform dispersion of nickel particles with excellent interfacial bonding with the Al matrix and also lead to significant grain refinement of the matrix. The novelty of the process is that the composite was processed in one step without any pretreatment being given to the constituents and no harmful intermetallic formed. The novel feature of the composite is that it shows a three fold increase in the yield strength while appreciable amount of ductility is retained. The hardness also improved significantly. The fracture surface showed a ductile failure mode and also revealed the superior bonding between the particles and the matrix. Electron backscattered diffraction (EBSD) and transmission electron microscopy analysis revealed a dynamically recrystallized equiaxed microstructure. A gradual increase in misorientation from sub-grain to high-angle boundaries is observed from EBSD analysis pointing towards a continuous type dynamic recrystallization mechanism. © 2010 Elsevier B.V.