In this study, billet of a binary Al-10at%Fe alloy was prepared from pure Al and Fe powders by the use of conventional press and sinter route. The sintered billet was then subjected to multiple passages of friction stir processing (FSP). After FSP, the structure of a binary Al-10at%Fe alloy can be refined to sub-micrometer scale. Transmission electron microscopy (TEM) showed that particles of Fe-containing phase were distributed uniformly in the aluminum matrix, and the mean size of these second phase particles was about 100nm. From the results of X-ray diffraction and energy dispersive spectroscopy (EDS), the Al-Fe second phase was identified as Al13Fe4. We also observed obvious reaction zone around iron particles in the friction-stirred zone. Apparently, a rapid in-situ reaction between Al and Fe had occurred in FSP. In order to reduce the reaction time and the heat input, the higher traversing speed was used. In addition, a higher sintering temperature was used to promote Al-Fe reaction. Furthermore, micro-hardness, tensile and compressive tests were performed to evaluate the mechanical properties of the Al-10at%Fe alloy fabricated by FSP.