Development of accident-tolerant fuel cladding (ATFC) materials for LWRs (Light Water Reactors) is being intensively carried out in many research centers in the world as the lesson-learned from the Fukushima Daiichi nuclear reactor power plant accident. One of the advanced high temperature materials which is intensively developed is Oxide Dispersion Strengthened (ODS) steel. The strengthened mechanism is generated by homogeneous dispersion of nano-meter sized ceramic oxide particles in the matrix of the steel which is done by mechanical alloying technique so called mechanosynthesis. Synthesis of an austenitic ODS steel powder of 316L with additional element of 6 wt.% aluminum and dispersion of nano-particles of 0.5 wt.% yttrium oxide (yttria: Y2O3) has been done. The aim of the research is to achieve a better performance of 316L austenitic steel as the proven material for power plant at elevated temperature by modified to become ODS austenitic steel with additional of aluminum. Mechanosynthesis was done using High Energy ball Milling (HEM) for 30 hours with BPR (Ball to Powder Ratio) of 10:1. Afterward, the sample was characterized using Scanning Electron Microscope-Energy Dispersive Spectroscope (SEM-EDS) and X-ray Diffraction (XRD) to analyze the microstructure characteristics. The results showed that the alloying between 316L and aluminum powders was formed. Furthermore, crystal grains and the particles of 316L-6Al-0.5Y2O3 steel powder was much smaller than as received 316L austenitic steel and aluminium powders. The particles size and element composition was homogeneously distributed. The results showed that the parameters of mechanical alloying for development of 316L-6Al-0.5Y2O3 ODS austenitic steel powder have reached the optimum condition.