In this research, aluminum alloy (A356.1) matrix composites reinforced with 1.5, 2.5 and 5 Vol.% nanoscale MgO particles were fabricated via powder metallurgy method. Pure atomized aluminum powder with an average particle size of $1{mu}m$ and MgO particulate with an average particle size between 60 to 80 nm were used. The specimens were pressed by Cold Isostatic Press machine (CIP), and were subsequently sintered at various sintering temperatures, viz. 575, 600 and $625^{circ}C$. Optimum amount of reinforcement and sintering temperature were determined by evaluating the density, microstructure and mechanical properties of composites. The composites were characterized by scanning electron microscopy (SEM) and X-ray diffraction (XRD). Hardness and compression tests were carried out in order to identify mechanical properties. Reinforcing the Al matrix alloy with MgO particles improved the hardness and compressive strength of the alloy to a maximum value of 44 BHN and 288 MPa, respectively. The most improved compressive strength was obtained with the specimen including 2.5% of MgO sintered at $625^{circ}C$. According to the experiments, a sintering temperature of $625^{circ}C$ showed better results than other temperatures. A good distribution of the dispersed MgO particulates in the matrix alloy was achieved.