Al-Fe alloys are widely applied in automobile, aerospace, military industry and other fields owing to their high specific strength, high specific stiffness and good stability of the microstructure originating from the low diffusivity of Fe in Al. However, conventional casting method leads to inferior mechanical properties of Al-Fe alloys due to the coarse grain microstructure, which cannot meet application requirements. In this work, fully densed Al₁₃Fe₄/Al composites were fabricated by combination of mechanical alloying and spark plasma sintering (MA-SPS) approaches. Effect of gradation of grinding balls on microstructure and properties of composites was investigated by means of XRD, SEM, TEM, hardness and compressive test. The results showed that the size of powders became more uniform by ball gradation in MA treatment, and solid solubility was greatly enhanded as well. Furthermore, the Al-Fe powder after MA using a single grinding ball size showed the microstructure of tiny white Fe particles on the surface of each particle, while no white Fe particles were observed for the one with ball gradation, which confirmed that ball gradation was more beneficial to the mixture and solid solution of Al and Fe, resulting in more homogeneously distributed powders with smaller particle sizes of 10 μm. The composites after SPS contained α-Al phase and intermetallic compound Al₁₃Fe₄. Three types of Al₁₃Fe₄ were observed: large particles (1~2 μm), ultrafine particles (0.1~1.0 μm) and nano-particles (about 20 nm). The large particles and ultrafine Al₁₃Fe₄ formed by the reaction between undissolved Fe particles and the Al melt while nano-particles of Al₁₃Fe₄ originated from the precipitation of supersaturated Al(Fe) solid solutions. The sintered sample with ball gradation after SPS showed optimized microstructure with coarser α-Al particles and ultrafine Al₁₃Fe₄ particles, resulting in good comprehensive properties with 227 HV in microhardness, 845.8 MPa in compressive strength and 13.6% in plastic deformation. The combination of large quantities of coarse α-Al particles and ultrafine Al₁₃Fe₄ particles were considered as the reason for high strength and high toughness of Al-Fe alloy。