Quasicrystalline phase formation during heat treatment in the mechanically alloyed Al65Cu20Fe15 powders was studied by X-ray diffraction (XRD) and differential scanning calorimeter (DSC). The mechanical alloying was performed at speed of 300 rev min(-1) for times up to 70 h. It was found that mechanical alloying of the Al65Cu20Fe15 powders did not result in the quasicrystalline (QC) icosahedral phase (i-phase) formation. The long time milling resulted in the formation of a cubic Al (Cu,Fe) solid solution phase (beta-phase). The cubic Al (Cu,Fe) solid solution identified as beta-phase was observed to be present as one of the major phases in the Al65Cu20Fe15 alloy. The formation of the quasicrystalline icosahedral phase (i-phase) was only observed for short time milled powders after additional annealing at temperature above 500 degrees C. The present investigation also showed that a tetragonal Al2Cu phase (theta-phase) forms with short time milling. The tetragonal Al7Cu2Fe1 phase (w-phase) was observed after heat treatment of the short time milled and unmilled powders. The present investigation indicated that an effective process to prepare the quasicrystalline materials was using a combination of short time milling and subsequent annealing.