With a purpose of synthesizing dispersion strengthened Mg-based materials by reaction milling, powders of pure Mg and Mg-Al alloy were mechanically alloyed with addition of MnO2 and Fe2O3. Mechanical alloying was carried out for 108ks by using a planetary ball mill under an argon atmosphere. After mechanical alloying, the powders were consolidated to the P/M materials by vacuum hot pressing and subsequent hot extrusion. Structural evolutions accompanying with the displacement reaction of oxygen were studied by XRD and TEM for the mechanical alloyed powders and extruded P/M materials. Mechanical properties were examined by hardness and compression tests for the extruded materials. In all the systems studied, solid state reactions started during mechanical alloying and further progressed during subsequent heat treatment. In Mg-MnO2 and Mg-Fe2O3 systems, decomposition of MnO2 and Fe2O3 occurred during mechanical alloying and formation of MgO was observed during subsequent heating. In Mg-Al-MnO2 and Mg-Al-Fe2O3 systems, the added oxides were decomposed and formation of MgO and intermetallic aluminide compounds occurred. In the as-extruded P/M materials, fine Mg matrix grains of 100-200 nm in size were observed, and extremely fine compounds of less than 20 nm were dispersed in the Mg matrix. At room temperature, 0.2% proof stress and specific proof strength of the as-extruded P/M material of Mg-Al-MnO2 system were 596MPa and 305MPa/(Mg/m(3)), respectively.