An attempt has been made to investigate Fe-rich fragments and surrounding intermetallic compounds in aluminum-steel friction stir welds using conventional EBSD + EDS as well as advanced Transmission Kikuchi Diffraction (TKD). Results indicate that the fragments are covered by a layer of orthorhombic Al5Fe2. This layer is surrounded by a mixed region composed of sub-micrometer Al3Fe crystals in a matrix of Al nano grains. Employing high beam current TKD on electron-transparent samples enables investigation of sub-micrometer grains in the mixed region with a higher spatial resolution than conventional EBSD. As a result, nano-twinning in Al in the mixed region has been observed. Microstructural and texture results imply that Fe-rich fragments travel through the Al matrix under extreme shear forces, severely refining Al grains, and inducing nano-twinning. Due to extreme shear forces and Fe outward diffusion, fine steel fragments dissolve in the surroundings leading to the nucleation of nano Al3Fe crystals particularly along Al grain boundaries. Al3Fe crystals consume the Al matrix as they grow in size and fraction.