The present paper describes about the Al-Ni-Al2O3 composite coating, which was developed on AA1100 aluminium alloy by gas tungsten arc (GTA) cladding method. The coating was developed by use of different composition of Al, Ni and Al2O3 mixed powders. Scanning electron microscopy (SEM) with energy dispersive X-ray (EDS) and X-ray diffractometry (XRD) were used to examine the microstructure and phase formation of the coating. Vickers microhardness and dry sliding wear test were used to study the mechanical and tribological properties of the coated layer under various normal loading conditions. It was observed that the increase in percentage composition of Al2O3 improved the metallurgical and mechanical properties of the coated layer. It was found that due to the development of Al2O3 reinforced intermetallic matrix composite the hardness and wear resistance of coated layer increased as compare to the AA11000 aluminium alloy substrate. It was also found that due to these phases the coefficient of friction of coated layer was lower than the substrate and the wear resistance of coated layer was higher than that of the substrate. The maximum hardness of coated layer was found to be nearly 26 times higher than that of the AA1100 aluminium alloy substrate. Also, the wear resistance of coated layer was nearly five to eight times higher than that of the AA1100 aluminium alloy substrate.