In this study, Fe–40at.% Al/Al 2 O 3 composite powders with an alternant Fe/Al lamellar structure were prepared by mechanical alloying process with 40vol.% of micrometer scale Al 2 O 3 particles. Using the mechanically alloyed composite powders, Fe–40at.% Al alloy/Al 2 O 3 composite coating was deposited by cold spraying. Nanometeric dispersoids were introduced through in situ oxidation during the mechanical alloying and the post-spray annealing. XRD analysis revealed that after the post-spray annealing, Fe (Al) solid solution and lamellar structured Fe/Al alloy transformed into B2 phase Fe40Al intermetallic. SEM observations indicated that the micrometric Al 2 O 3 dispersoids distributed uniformly in Fe–40at.% Al (Fe40Al) intermetallic matrix. TEM examination revealed that the in situ formed nanometric dispersoids were present both at the grain boundaries and inner FeAl crystallites. The in situ formed nanometric dispersoids were identified to be spinel FeAl 2 O 4 and γ-Al 2 O 3 by the electron diffraction combined with the energy dispersive X-ray spectrometry. A Vickers microhardness of 867±66.5H V0.3 and an indentation fracture toughness of 23.8±2.7MPam 0.5 were obtained for the Fe–40at.% Al/Al 2 O 3 composite. These results indicated that dual-scale dispersoids can attain simultaneous strengthening and toughening effects for intermetallics-based composite. The ductile manner of the fracture surface suggested that the toughening effect can be generated by thin Fe–40at.% Al ligaments created by the dispersion of oxides.