The thermite reaction between Al and CuO is well known and highly exothermic. For a conventional thermite mixture, the reaction is rate limited by a slow heterogeneous mass transfer at the metal and oxide interface. The relatively low reaction rate and a difficult ignition have restricted practical applications for this reaction. For newly developed nano-composed thermites, the interface area is substantially increased resulting in a much higher reaction rate and a new range of possible applications. A top-down approach to preparation of reactive nanocomposite materials in the Al-rich Al-CuO system is discussed in this paper. The nanocomposite materials are prepared by mechanically refining starting micron-sized powders at room temperature. The refinement is accomplished using arrested reactive milling, a technique based on high energy ball milling that is stopped (or arrested) before the exothermic reaction between Al and CuO is triggered mechanically. The products are micron-sized, fully dense powders in which reactive components are uniformly mixed on the nanoscale. Optimized milling conditions for the powders with bulk compositions xAl+3CuO with x=8, 10, and 12 are found. Respective powders are produced and characterized. Particle sizes are measured and the sizes of nano-inclusions of CuO in Al matrix are determined. Reactions occurring in the nanocomposite materials are also characterized by thermal analysis. Ignition of the produced powders is studied by coating them onto an electrically heated filament. Constant volume explosion experiments are used to characterize combustion performance of the produced powders. Compositions of the produced powders and products of their combustion are studied by x-ray powder diffraction. Correlations between combustion performance and material characteristics are established. Ignition for Al-rich Al-CuO nanocomposite powders was observed to occur at 870 ± K independently of the heating rate.