Electroless plating is one method to coat Al2O3 particles reinforced. This process has been carried out to coat Al2O3 with electrolite solution which content of nitride acid (HNO3), Al and Mg powders. The metal oxide layer of spinel phase (MgAl2O4) is formed on the surface of Al2O3 which can improve wettability of Al2O3. The addition of Mg powder into solution was various from 0.002 to 0.012 mol while Al powder was kept constant i,e. 0.018 mol. The effect of Mg on formation of metal oxide layer on Al2O3 particles have been studied. It is found that the addition of 0.004 mol of Mg generated homogeneous thin spinel layer (MgAl2O4) on the surface of Al2O3 particles. This condition was applied to form spinel layer on Al2O3 particles reinforced for making Aluminium Matrix Composites (AMC) with 12.5Vf% of Al2O3 particles reinforced. It is found that tensile strength and hardness as well as wear resistance of AMC has been improved compare to unreinforced.