With a purpose of attesting strength increases by internal oxidation of aluminum alloys, P/M materials of Al-8mass%Fe alloy was prepared by mechanical alloying from three different starting materials. That is, Fe was added to aluminum as elemental Fe, as Al₃Fe intermetallic compound and as Fe₂O₃ oxide. Mechanically alloyed powders were consolidated by hot-extrusion to the P/M materials of which constituent phases, microstructures and mechanical properties were examined. In case of Fe₂O₃ addition, Al-Fe alloy was obtained by reduction of Fe₂O₃ accompanied with formation of Al₂O₃. The P/M materials with addition of Fe₂O₃ showed the highest tensile strength of 555 MPa at room temperature, and 340 MPa at 573 K. Hence, strength was increased by internal oxidation of aluminum alloys.