Dispersions of non-soluble ceramic particles in a metallic matrix can enhance the strength and heat resistance of materials. With the advent of mechanical alloying it became possible to put the theoretical concept into practice by incorporating very fine particles in a flirty uniform distribution into often oxidation- and corrosion- resistant metal matrices. e.g. superalloys. The present paper will give an overview about the mechanical alloying technique as a dry, high energy ball milling process for producing composite metal powders with a fine controlled microstructure. The common way is milling of a mixture of metallic and nonmetallic powders (e.g. oxides. carbides, nitrides, borides) in a high energy ball mill. The heavy mechanical deformation during milling causes also fracture of the ceramic particles to be distributed homogeneously by further milling. The mechanisms of the process are described. To obtain a homogeneous distribution of nano-sized dispersoids in a more ductile matrix (e.g. aluminium-or copper based alloys) a reaction milling is suitable. Dispersoid can be formed in a solid state reaction by introducing materials that react with the matrix either during milling or during a subsequent heat treatment. The pre-conditions for obtaining high quality materials, which require a homogeneous distribution of small dis-persoids, are: milling behaviour of the ductile phase (Al, Cu) will be improved by the additives (e.g. graphite), homogeneous introduction of the additives into the granules is possible and the additive reacts with the matrix or an alloying element to form hard particles that are inert with respect to the matrix also at elevated temperatures. The mechanism of the in-situ formation of dispersoids is described using copper-based alloys as an example. A comparison between the in-situ formation of dispersoids (TiC) in the copper matrix and the milling of Cu-TiC mixtures is given with respect to the microstructure and properties, obtained.