The work reported in this paper is aimed at establishing the relationship between processing and the wear resistance of the metal matrix composites (MMCs) based on a novel alloy, Al-20Si-5Fe-3Cu-1Mg. The MMCs were processed via a commercially viable powder metallurgy (PM) route, i.e. through mixing the atomized matrix alloy powder with 10 vol % SiC or Al2O3 particles, cold isostatic pressing, degassing and hot extrusion. It has been found that the extrusion window of the MMCs is greatly narrowed due to their increased deformation resistance on one hand and incipient melting of their matrix on the other. For a sound MMC extrudate, a reduction ratio over a critical value must be applied. However, a further rise of this ratio leads to deterioration of local interfacial cohesion between the ceramic phase and the matrix dispersed with a high volume fraction of silicon crystals and intermetallic dispersoids, thus degrading the MMCs in tensile properties. Furthermore, fretting wear tests at room and elevated temperatures and with dry and wet contacts show that the MMCs extruded at a higher reduction ratio has a higher mass loss and an increased friction coefficient. The work points to the direction of further research, i.e. on MMCs containing spherical reinforcement instead of commonly used angular particles.