An Al(Mg)-NiO composite was manufactured using combined mechanical alloying (MA) and powder consolidation methods that yielded well-consolidated and very-fine grained bulk material. Compression tests at 293 K - 773 K revealed high mechanical properties of the material. Preliminary annealing at 823 K/6 h was found to result in the flow stress reduction at 573 K - 773 K. However, the effect of preliminary annealing on the flow stress value was relatively low for Al(Mg)-NiO if comparing to similar tests performed for the Al-NiO composite. Structural observations revealed very-fine grained structure of both as-extruded and annealed Al(Mg)-NiO composites. The chemical reaction between the composite matrix and reinforcements (NiO) at sufficiently high temperatures resulted in fine grains and spinel-type particles’ development. With respect to the similarly produced Al-NiO composite, a magnesium addition was found to intensify chemical reaction between Al(Mg)-based matrix and NiO particles. As result, fine Al3Ni particles were observed in both hot-extruded material and Al(Mg)-NiO samples annealed at 823 K/6 h.