Nanostructured Cu-7.5vol.%Al₂O₃ composite powders were produced from a mixture of Cu powder and Al₂O₃ nanopowder using two routes of high energy mechanical milling. The milled composite powders were heat treated at 150, 300, 400 and 500°C for 1 hour, respectively, to determine the thermal stability of the microstructure and corresponding micohardness change of the powder particles as a function of the annealing temperature. For the nanocomposite powder produced with 12 hours of milling (Route 1), heat treatment at 150°C did not change the microstructure, increasing the annealing temperature from 150 to 500°C caused the Cu grain sizes to increase due to grain coarsening. For the composite powder produced with 24 hours milling (Route 2), the grain sizes of the Cu matrix also increased due to grain coarsening with increasing the annealing temperature from 150 to 500°C. Average microhardness decreased significantly for both the nanocomposite powders but the degree of grain size increase was smaller with increasing the annealing temperature from 400 to 500°C.