Al₂O₃ particle reinforced Al matrix composites were prepared in Fe2O3-Al system by in-situ synthesis. The microstructure of the composites was observed by OM （optical microscope）, SEM （scanning electron microscope） and TEM （transmission electron microscope）. The results reveal that net-like Fe-enrichment phase can be observed in the composites and fine in-situ particle with less than 0.5μm in size is uniformly distributed in the microstructure. In addition, Al₂O₃ particle with round edges can exhibit desirable and clear bonding with matrix. Hardness of the composites is slightly increased, however, ambient tensile strength is somewhat decreased, while tensile strength at 300℃ reaches up to 92.18MPa, increased by 26%, compared with that of matrix.