The present paper describes the preparation, characterization, and stability of Pb-Sn multiphase alloy nanoparticles embedded in Al matrix via mechanical alloying (MA). MA is a solid-state processing route, which can produce nanocrystalline phases by severely deforming the materials at high strain rate. Therefore, in order to understand the effect of the increasing interface as well as defects on the phase transformation behavior of Pb-Sn nanoparticles, Pb-Sn multiphase nanoparticles have been embedded in Al by MA. The nanoparticles have extensively been characterized using X-ray diffraction and transmission electron microscope. The characterization reveals the formation of biphasic as well as single-phase solid solution nanoparticles embedded in the matrix. The detailed microstructural and differential scanning calorimetry studies indicate that the formation of biphasic nanoparticles is due to size effect, mechanical attrition, and ballistic diffusion of Pb and Sn nanoparticles embedded in Al grains. Thermal characterization data reveal that the heating event consists of the melting peaks due to the multiphase nanoparticles and the peak positions shift to lower temperature with the increase in milling time. The role of interface structure is believed to play a prominent role in determining the phase stability of the nanoparticle. The results are discussed in the light of the existing literature.