Fine, pure Ti 3 AlC 2 powder is prepared in a very mild condition via Ti 3 Al alloy and carbon black with the assistance of molten salts. X-ray diffraction, scanning electron microscopy, TG-DSC, and transmission electron microscopy (TEM) characterizations show that the high purity, nanosized Ti 3 AlC 2 can be obtained at 900 • C with the 1:1 salt-to-material ratio. The formation mechanism of Ti 3 AlC 2 through this strategy of alloy raw material is fully studied under further TEM investigations, showing that the reaction process can basically be described as Ti 3 Al and C → TiAl and TiC → Ti 2 AlC and TiC → ψ and TiC → Ti 5 Al 2 C 3 and TiC → Ti 3 AlC 2 , where the key ψ, a modulated Ti 2 AlC structure, is determined for the first time containing alternate-displacement Al layers along (0 0 0 2) of Ti 2 AlC phase with a distinct selected area electron diffraction pattern. Such alternant displacement is considered a precondition of forming Ti 5 Al 2 C 3 through topotactic transition, followed by Ti 5 Al 2 C 3 converting into Ti 3 AlC 2 by the diffusion of Ti, C atoms in the outside TiC. Several parallel orientations can be observed through the phase transition process: Ti 2 AlC (0 0 0 2)//ψ (0 0 0 1), ψ (0 0 0 1)//Ti 5 Al 2 C 3 (0 0 0 3), Ti 5 Al 2 C 3 (0 0 0 3)//Ti 3 AlC 2 (0 0 0 2). Such parallel orientations among these phases apply an ideal condition for the topotactic reaction. The distinct path of the phase transition brings a significant change of heat effect compared with the traditional method, leading to a fast reaction rate and a mild reaction condition.