This study focuses on characterization of an (Al,Cr)3Ti alloy processed together with titanium powder by reactive mechanical milling (RMM) to produce an ultrafine grained intermetallic alloy matrix with in situ carbide and hydride phases formed during processing. Observations of X-ray scattering as RMM processing time increases show severe broadening of matrix diffraction peaks, accompanied by the appearance of diffraction peaks resulting from the formation of very small crystallites of TiC and TiH1.92 phases with increasing volume fractions, and finally, increasing background intensity as the crystallite size of the matrix phase decreases to ∼2 nm. Estimates of phase volume fractions were made by the direct comparison method, along with crystallite sizes by Warren–Averbach peak profile analysis. The general increase in background intensities has been attributed to random static displacements of the large fraction of atoms located within the grain boundary regions. Further, it has been concluded that the matrix material with a crystallite size of a few nanometers has about half the atoms in statically displaced positions defining the boundary regions. The results argue that background intensity changes should not be ignored and are useful in interpreting scattering from these nano-scale materials.