We report on the formation and chemical leaching of non-equilibrium $Al_{0.6}(Fe_{75}Co_{25})$ alloy produced by rod milling. X-ray diffractometry, transmission electron microscopy, differential scanning calorimetry, scanning electron microscopy, and vibrating sample magnetometry were used to characterize the as-milled and leached specimens. After 400 h, only the $Al_{0.4}Fe_{0.6}$ peak of the body-centered cubic type was present in the XRD pattern. The entire rod milling process could be divided into three different stages of milling: agglomeration, disintegration, and homogenization. The saturation magnetization, $M_s$ decreased with increased milling time, the $M_s$ of the powders before milling was about 113.8 emu/g, the $M_s$ after milling for 400 h was about 11.55 emu/g. Leaching of the Al in KOH of the Al at room temperature from the as-milled powders did not induce any significant change in the diffraction pattern. After the leached specimen had been annealed at $600^{circ}C$ for 1 hour, the nanoscale crystalline phases were transformed into the bcc Fe, cubic Co, and $CoFe_2O_4$ phases. On cooling the specimen from 85$0^{circ}C$, the degree of magnetization increased slightly, then increased sharply at approximately 364.8$^{circ}C$, indicating that the bcc $Al_{0.4}Fe_{0.6}$ phase had been transformed to the Fe and Co phases.