The utilization of Al2O3 nanopowder to reinforce AA5754 aluminum alloy through blind holes employing the friction stir processing (FSP) technique to produce an aluminum matrix nanocomposite is explored in this paper. Motivated by the necessity to enhance the strength and ductility of welded joints, the impacts of varying the tool rotational speed (rpm) and blind hole diameter on the microstructure and mechanical properties of the joints are investigated. Experimental characterization techniques including SEM, optical microscopy, microhardness, and tensile tests were employed to analyze the welded joints produced under different processing parameters (tool rotational speeds of 910, 1280, and 1700 rpm, and blind hole diameters of 0, 1, 1.5, and 2 mm). Comparative analyses were conducted against base metal properties and joints without reinforcement powder. It was found that the addition of nanopowder resulted in a decrease in the maximum generated heat during FSP, while also reducing the stir zone size compared to samples without nanopowder. Moreover, enhancements in both the strength and ductility of the joints were observed with the incorporation of Al2O3 nanoparticles. The optimal combination of welding conditions, observed at 1280 rpm rotational speed and 1.5 mm hole diameter, yielded a remarkable ultimate tensile strength of 567 MPa, accompanied by a hardness of 45 HV. These results underscore the potential of nano-Al2O3 reinforcement in significantly improving the mechanical properties of the produced nanocomposite, with implications for advancing the performance of welded structures in various engineering applications.