Mechanical alloying has been used to prepare a mixture of alumina and yttria as a means to create composites with a dominant matrix phase with small particles of a dispersed second phase. A way of avoiding possible problems with the contamination from the milling tools, is to use balls and vials in a material belonging to the system. Here a mixture of 37.9 wt% alumina and 62.1 wt% yttria has been milled with steel and alumina tools for times up to 8 h. The milled powder was subjected to thermal cycles up to 1500°C during which the phase evolution was monitored using X-ray diffractometry (including high-temperature XRD) and differential thermal analysis. The results show that although the loss of mass from alumina milling tools does not move the system from the alumina-yttria binary system, the large amounts of alumina added to the system cause difficulties in controlling the process. The phase evolution of the powders, both during milling and subsequent heat treatment, can be controlled by altering parameters of the milling, such as the density of the balls, the milling time, the powder to ball mass ratio and the hardness of the milling tools.