Measurements of specific heat, dc magnetic susceptibility, and Yb L II and L III x-ray absorption near-edge structure ͑XANES͒ and extended x-ray absorption fine structure ͑EXAFS͒ on YbAl 3 milled alloys are reported. X-ray diffraction patterns are consistent with a reduction in particle size down to 10 nm and an increase in the lattice strain up to 0.4% for 120 h of milling time. A decrease in the mean valence from 2.86 for the unmilled alloy to 2.70 for 120 h milled YbAl 3 is obtained from the analysis of XANES spectra. From the analysis of spectra in the EXAFS region, an increase in the mean-square disorder of neighbor distance with milling time is detected in good agreement with the results of x-ray diffraction. Size effects strongly influence the magnetic and thermal properties. The value for the maximum of the magnetic susceptibility decreases around 30% for 120 h milled alloy and an excess specific heat, with a peak around 40 K in the milled samples, is derived. These changes in the physical properties along the milled YbAl 3 alloys are associated with the reduction in particle size. Such a reduction leads to the existence of a large number of Yb 2+ atoms at the surface with respect to the bulk affecting the overall electronic state.