A simple method to produce Aluminum Metal Matrix Nanocomposite with 2 to 35 volume percent of nano Al.sub.2O.sub.3 reinforcement phase without adding nano Al.sub.2O.sub.3 particles in a direct step of the metal matrix. The initial necessary material is an aluminum powder with nanoscale surface oxide. The volume percent of Al.sub.2O.sub.3 is determined by the particle size distribution and the thickness of the Al.sub.2O.sub.3 layer. The Al.sub.2O.sub.3 surface layers or shells are broken up and are uniformly distributed throughout the nanocomposite after the powder consolidation into billet and the hot and/or cold metal working of the billet.