Al matrix composites reinforced with in-situ synthesized TiC/Al3Ni particles were fabricated by friction stir processing (FSP) using mechanically activated powders. The effects of post-processing heat treatment on the microstructure and mechanical properties were investigated. Ni-TiC powder mixtures were prepared by mechanical alloying (MA) and distributed in AA1050 alloy using FSP. The microstructure of composite layers was studied by optical and field emission scanning electron microscopy (FESEM), and structural evolutions during FSP and heat treatment were investigated by X-ray diffractometry (XRD). XRD analysis showed partial reaction between MAed powders and the matrix after 2 FSP passes and the formation of Al3Ni and TiC compounds. Unreacted powders remained after 6 FSP passes, transformed to Ni3Al and TiC after heat treatment at 550 • C. Mechanical properties of composite layers were investigated by tensile and microhardness tests. Heat-treated surface composite layer exhibited an increased tensile strength of 158 MPa with more uniform microhardness in comparison with the as-FSPed sample.