In this paper, in situ Al4C3 and carbon nanotubes (CNTs) hybrid-reinforced aluminum matrix composites were prepared by a two-step ball milling (TSBM), consisting of a 24-h long-time ball milling (LTBM) and a 6-h short-time ball milling (STBM). During LTBM, most of the CNTs were seriously damaged, and many amorphous carbon atoms derived from these damaged defects would react with Al powder to form in situ Al4C3 nanorods. Subsequently, 1 wt% CNTs were added into the composite powders for STBM to uniformly disperse CNTs into the composite powders. Compared with that of the composite prepared by one-step ball milling, the comprehensive mechanical properties of the composite prepared by the TSBM are improved obviously due to the synergistic effects of in situ Al4C3 and CNTs, and the tensile strength and elongation reached 258 MPa and 19.5%, respectively. The strengthening mechanisms of TSBM composite include fine-grained strengthening, dispersion strengthening by in situ Al4C3, and load transfer from matrix to CNTs.