This research presents an approach for C-O grain boundary strengthening of Al composites that used an in situ method to synthesize a C-O shell on Al powder particles in a vertical tube furnace. The C-O reinforced Al matrix composites (C-O/Al composites) were fabricated by a new powder metallurgy (PM) method associated with the hot pressing technique. The data indicates that Al4C3 was distributed within the Al matrix and an O-Al solution was distributed in the grain boundaries in the strengthened structure. The formation mechanism of this structure was explained by a combination of TEM observations and molecular dynamic simulation results. The yield strength and ultimate tensile strength of the C-O/Al composites, modified by 3 wt.% polyvinyl butyral, reached 232.2 MPa and 304.82 MPa, respectively; compared to the yield strength and ultimate tensile strength of the pure aluminum processed under the same conditions, there was an increase of 124% and 99.3%, respectively. These results indicate the excellent properties of the C-O/Al-strengthened structure. In addition, the strengthening mechanism was explained by the Hall–Petch strengthening, dislocation strengthening, and solid solution strengthening mechanisms, which represented contributions of nearly 44.9%, 15.9%, and 16.6% to the total increased strength, respectively. The remaining increment was attributed to the coupled strengthening of the C and O, which contributed 20.6% to the total increase.