The microstructure characterization, optical properties, electrical transport, and dielectric properties of the thermally stable NiAl 2 O 4 /Al 2 O 3 nanocomposite powder sample synthesized by the mechanochemical‐assisted solid‐state reaction from the equimolar mixture of NiO and Al 2 O 3 powders are reported. Rietveld refinement, selected‐area electron diffraction pattern, and Fourier‐transform infrared spectrum analyses confirm the formation of a NiAl 2 O 4 spinel phase with a minor Al 2 O 3 phase in the as‐synthesized powder. Transmission electron microscope images reveal the particle size of the powder sample, ≈26 nm. Raman spectrum reveals the presence of NiAl 2 O 4 normal spinel as a major phase in the sample. The temperature and frequency dependence of the dielectric constants of the NiAl 2 O 4 /Al 2 O 3 nanocomposite are explained by Koop's phenomenological theory. The electric modulus approach is used to analyze the electrical transport and dielectric relaxation of NiAl 2 O 4 /Al 2 O 3 at different temperatures. The electric modulus plot with elevated temperature shows a dielectric loss peak and reflects interesting information on the grains and grain boundaries of the material with varying temperatures.