In order to investigate the diffusion and transition mechanism of Ag in Ag-Al supersaturated solid during heat treatment in oxidizing atmosphere, Ag/Al alloy powder was prepared by atomization, then Ag/Al2O3 composite was prepared by high energy ball milling and oxidizing reaction. The diffusion rate and the phase state were calculated by the Molecular Dynamics Simulation model of solid solution alloy. The results show that the precipitation of great quantity of Ag occurs at 600 K, accompanied by the formation of compact alumina film and the transition of alloy phase internal particles. The precipitated phase can be controlled in the range of nano size. The experimental results can be explained and predicted properly by the calculated model.