Abstract: Extensive dislocation structure was observed by TEM in the Fe₃Al/Al₂O₃ nanocomposite. The composites were thus strengthened due to microstructure refinement through subgrain formation. The ordered strengthening mechanism of Fe₃Al intermetallic further increased the mechanical properties of Fe₃Al/Al₂O₃ composites. It was seen from TEM that lots of dislocations were produced in Al₂O₃ intergrains by introducing Fe₃Al. The dislocations mainly existed near the interphase of Fe₃Al and Al₂O. TEM shows Fe₃Al can breed rich dislocations in Al₂O₃, which were nailed by nano grains. The composites were strengthened due to microstructure refinement through subgrain formation. Superlattice dislocations observed in Fe₃Al can produce orderly strengthening.