Al-l4wt.%Ni-l4wt.% Mm(Mm=misch metal) alloy powders rapidly solidified by the gas atomization method were subjected to mechanical milling(MM). The morphology, microstructure and hardness of the powders were investigated as a function of milling time using scanning electron microscopy(SEM), transmission electron microscopy(TEM) and Vickers microhardness tester. Microstructural evolution in gas-atomized Al-l4wt.%Ni-l4wt.% Mm(Mm=misch metal) alloy powders was studied during mechanical milling. It was noted that the as-solidified particle size of 200mutextrmm decreases during the first 48 hours and then increases up to 72 hours of milling due to cold bonding and subsequently there was continuous refinement to 20mutextrmm on milling to 200 hours. Two microstructurally different zones, Zone A, which is fine microstructure area and Zone B, which has the structure of the as-solidified powder, were observed. The average thickness of the Zone A layer increased from about 10 to 15mutextrmm in the powder milled for 24 hours. Increasing the milling time to 72 hours resulted in the formation of a thicker and more uniform Zone A layer, whose thickness increased to about 30~50mutextrmm. The TEM micrograph of ball milled powder for 200 hours shows formation of nano-particles, less than 20 nm in size, embedded in an Al matrix.