In this research, in situ ultrafine Al–Ni intermetallics were fabricated as reinforcement in the aluminum matrix by Friction Stir Process (FSP). Activated and non-activated powders were used as reinforcement agents. The FSP was performed under the rotating speed of 1250rpm, traverse speed of 24, 32, 44 and 62mm/min to fabricate composite. Scanning Electron Microscopy, Optical Microscopy and XRD patterns were used for microstructural observations and phase analysis of fabricated composite, respectively. In this study, it is shown that by using nickel powder (non-activated), only Al3Ni compound is formed during FSP. But in the fabricated composite with activated powder because of increasing grain boundaries and dislocation during ball milling, Al3Ni2, Al3Ni and AlNi may be formed. Using activated powder creates ultrafine intermetallic reinforcements and causes more uniform distribution of intermetallics.