Nanocrystalline powders of various compositions in the Al2O3–MgO binary system were synthesized using a novel “auto ignition” process. The respective nitrates were used as starting materials and urea as fuel. Thermodynamic calculations of the adiabatic temperatures were performed for various compositions from Al2O3-rich to the MgO-rich side of the phase diagram. The combustion temperatures of the different compositions were also determined experimentally. The as-synthesized powders were characterized by x-ray diffraction (XRD) and transmission electron microscopy (TEM). As a result of processing, spinel, alumina, magnesia, and solid solutions/ nanocomposites thereof formed. Grain sizes and the lattice parameter were calculated based on XRD results. Where appropriate, the lattice parameter versus the composition of these solid solutions satisfied Vegard's law. Spinel grains were in the 13–20 nm range, alumina grains were 30–40 nm, and MgO grains were 2–28 nm. The grain sizes calculated from XRD results were in good agreement with the TEM results.