This work investigated the quasicrystalline phase formation during heat treatment in the Al63Cu25Fe12 alloy prepared via mechanical alloying, starting from pure elemental powders. The mechanical alloying process was performed at a speed of 300 rpm for times up to 70 hours. The structural evolution of the mechanically alloyed Al63Cu25Fe12 powders at different stages of milling was examined by X-ray diffraction (XRD) and scanning electron microscopy (SEM) techniques. The present results showed that mechanical alloying of the Al63Cu25Fe12 alloy did not result in the quasicrystalline icosahedral phase (i-phase). The long time milling resulted in the formation of an AlFe(Cu) solid solution identified as the beta-phase. In order to examine the structural changes with annealing temperature, the mechanically alloyed powders were heat treated at 600, 700 and 800 degrees C for 4 hours under vacuum. However, the formation of a quasicrystalline phase in the Al63Cu25Fe12 alloy was observed after additional annealing at elevated temperature. In the present work, quasicrystalline phase formation in both the as-milled and heat-treated powders is discussed in detail.