This study presents preliminary results on the development of a new aluminum alloy for use as a matrix in discontinuously reinforced aluminum (DRA). An alloy based on Al-6Mg-2Sc-1Zr (wt.%) composition was selected for this purpose. The alloy was processed using a conventional powder metallurgy process. The gas atomized powder of Al-6Mg-2Sc- 1Zr alloy showed large primary particles at the surface and on the cross-section. The size and fraction of these primary A13(Sc,Zr) particles decrease with decreasing size of the particles, which corresponds to an increasing cooling rate of the powder. Powder particles with 25 pm size did not show any primary particles indicating that 25 mm sized powder is suitable for fabrication of DRA. The matrix alloy and DRA showed a good combination of strength and ductility at ambient temperature. The isothermal annealing data on the matrix alloy showed that the alloy is thermally stable at 3OO°C up to 500 hours. The Al-6Mg-2Sc-1Zr alloy appears to be a suitable candidate for use as a thermally stable matrix alloy for DRA application.