The interface reaction and its effect on the mechanical properties have been experimentally studied for aluminum-based composites reinforced with titanium dioxide nanoparticles (TiO₂). Aluminum-based composites containing TiO₂ nanoparticles (20 nm in size) are developed by hot-rolling the ball-milled powder. High chemical potential energy of the nanoparticles induces the fast formation of the interface layer during the heat treatment process, and high yield stress of 514 MPa in a composite containing 5 vol.% TiO₂ nanoparticles can be achieved. Furthermore, dislocations are emitted at the nanoparticle/matrix interface during deformation due to the high stress concentration. This study can provide useful insights for the design of metal-matrix composites.