Abstract: The liquid encapsulated approach was used in rare-earth modification on the surface of α-Al₂O₃ micro powder in this paper. Then the aluminum matrix composite reinforced by the α-Al₂O₃ particles that had been modified by Y₂O₃ was fabricated using the squeeze-casting technique. And the microstructure and tensile properties of the composites were analysed and studied. The result showed that α-Al₂O₃ micro powders modified by Y₂O₃ were distributed uniformly in the aluminum liquid. The interfacial wettability was improved. The microstructure of the composites was more even.The TEM observation showed that the α-Al₂O₃ powders were encapsulated homogeneously. EDAX analysis indicated that the powder surfaces included high content of Y and Al elements. And the diffraction peak of Y₂O₃ was also found in the X-ray diffraction spectrum graph. The tensile testing indicated that the strengthening effect of the modified-Al₂O₃ on Al alloy was improved obviously and the tensile strength of composites was improved 29.8 %,the yield strength was increased 38.4 % and the elongation was ncreased 10.3 %.The SEM analysis of the fracture indicated that the dimples of the modified-Al₂O_3P/6061Al composites were more even and the material embodied good plastics.