The microstructure evolution and grain growth behavior, of gas-atomized Al₈₈Ni₉Ce₂Fe₁ nanocomposite materials, were studied by means of the X-ray diffraction, transmission electron microscopy, and differential scanning calorimetry. The results showed that the microstructure of as-atomized powders are affected by the degree of solute supersaturation in matrix, the microstrain contained, the size, distribution and volume fraction of nanophase precipitated, and these are essentially sensitive to the powder particle sizes. Moreover, there appeared to be a two-stage phase transformation during thermal crystallization, i.e., the precipitation of α-Al and the growth of Al₃(Ni, Fe) nanophase in preference to Al₁₁Ce₃ nanophase, respectively. Finally, the grain growth kinetics of α-Al at temperatures of 250 to 300°C, revealed that the volume-diffusion grain growth mechanism with an activation energy of 1.3 eV is controlling in the nanophase materials.