In the present study, Fe-50at%Al/WC intermetallic matrix composite powder was produced through mechanical alloying (MA) followed by annealing treatment. The phase transformations, grain size, microstructure and thermal stability of the composite powder during milling and annealing treatment were studied. The results showed that a bcc Fe(Al) solid solution reinforced with nanoscale WC particles was formed through high-energy ball milling The grain size of Fe(Al) decreased and the lattice strain of Fe(Al) increased with increasing milling time. The as-milled Fe(Al)/WC composite powder had lamellar structure. The oxygen content of Fe(Al)/WC composite powder increased with increasing milling time. The phase transformation from Fe(Al) to Fe-Al intermetallic phases was related to the milling time of composite powder and could occure at temperature of 400°C.