The microstructures and tensile properties of two ultrafine structured Cu–5vol%Al₂O₃ nanocomposite samples made by a combination of high energy mechanical milling of a mixture of Cu powder and gamma Al₂O₃ nanopowder and powder compact extrusion were studied. The sample extruded at 750 °C exhibited a microstructure consisting of Cu grains with sizes in the range of 100–500 nm and a dispersion of Al₂O₃ nanoparticles with sizes in the range of 20–345 nm. With the extrusion temperature increasing to 900 °C, the Cu grain sizes remained almost unchanged, but a large fraction of the Al₂O₃ nanoparticles were dissolved, leading to possible formation of nanometer sized Al³⁺/O²⁻ clusters. This microstructural difference of the two samples causes an interesting difference in tensile properties, with the sample extruded at 900 °C showing approximately 150 MPa higher yield strength and ultimate tensile strength and also better ductility than the sample extruded at 750 °C. It appears that this significant beneficial effect of dissolution of Al₂O₃ nanoparticles is mainly caused by the significant strengthening effect of the nanometer sized Al³⁺/O²⁻ clusters through Orowan mechanism.