As a consequence of widening range of applications of metal-matrix composites (MMCs), the machining of these materials has become a very important subject for research. This paper describes a study of chip formation during the machining of MMCs produced by the mechanical alloying (MA) technique. Aluminium based composite which contained various amounts of in situ Al4C3 particles, depending on MA time, were produced. Scanning electron microscopy and mechanical properties of the block samples produced by powder metallurgy technique were investigated. The chip-formation mechanism in machining of these MMCs at various cutting speeds has, therefore, been investigated by using a quick-stop device. During the machining of MMCs, elemental and arc chips formations were observed. Increasing the hardness due to high volume fraction of Al4C3 in the matrix resulted in a decrease in the formation of built-up edge but increased the surface quality at high cutting speeds. It was concluded that the effect of Al4C3 on the crack formation in shear plane, shortened the chip contact length and the chip segment thickness. (C) 2003 Elsevier Science Ltd. All rights reserved.