Mg-9%Al alloy was mechanically alloyed with addition of metal oxide (TiO₂ and ZrO₂) by using a planetary ball mill under an Ar gas atmosphere. After mechanical alloying, the powders were consolidated to the P/M material by vacuum hot pressing and hot extrusion. Solid state reaction during heating of the mechanically alloyed powders and P/M materials was studied by DSC, XRD and TEM. In both Mg-Al-TiO₂ and Mg-Al-ZrO₂ systems, the solid state reaction occurred during heating after mechanical alloying. TiO₂ and ZrO₂ were decomposed and formation of MgO occurred. In the Mg-Al-ZrO₂ system, however, the added ZrO₂ remAlned partially even after heating of the extruded material at 773K for 7.2ks. Consequently, obtained dispersion strengthened Mg materials showed high hardness and proof strength.