To explore potential applications of nanocomposites for microelectronic packaging, the thermal properties were investigated on newly developed nanocrystalline Al composites reinforced by AlN nanoparticles. It was found that the thermal conductivity (TC) is reduced with increasing AlN volume fraction (Vp), since connectivity of Al matrix is decreased by introduction of the nanoparticles. Although AlN nanoparticles introduce thermal resistance, they still have significant contribution to the TC of the composite as high-TC inclusion. Particularly, a percolation behavior of AlN nanoparticles is thought to occur with the threshold at 23–30%. Measurements at elevated temperatures (∼500 °C) show almost no distinct degradation of TC relative to room temperature. Moreover, the coefficient of thermal expansion (CTE) is remarkably lowered as Vp increases, e.g., from 26 × 10−6 to 13.9 × 10−6 K−1, by raising Vp to 39%. Therefore, the nanocomposites may be applicable as electronic packaging material, due to the combination of acceptable TC and low CTE.