The ability to produce a NiAl intermetallic base composite with dramatically higher energy absorption capability and damage tolerance has been demonstrated. The approach consists of incorporating continuous tubular 304 stainless steel toughening regions throughout the NiAl matrix. To compensate for the increase in density resulting form the 304 stainless steel, B4C particulate was added to the NiAl so that the overall composite density was within 5% of the value for monolithic NiAl. The notched Charpy impact energy absorption of the B4C/NiAl/304 composites was in the range of 15 to 90 J/cm2, compared to a value of 0.8 J/cm2 for NiAl. The higher energies were measured on samples that deflected the crack front more extensively during failure. For a given interfacial condition, the energy absorption increased as the wall thickness of the 304 tubular toughening regions increased. Finally, room temperature tensile testing of the composites resulted in very large failure strains (20–35%) owing to the 304 stainless steel being able to sustain the applied load once the NiAl regions had completely cracked.