A method of making a composite material composed of fine powder particles embedded in matrix metal, each of the particles having a metallic core and a ceramic surface layer which is a compound of the metal composing said core and another element, the average value of the ratio of the thickness of the surface layer of a powder particle to the radius of the particle being substantially greater than 0.05, wherein said core metal in a gaseous form is passed through a first convergent-divergent nozzle and is thereby rapidly cooled by adiabatic expansion, and is then mixed with said another element in the gaseous state, the resulting mixture being then passed through a second convergent-divergent nozzle and being thereby rapidly cooled by adiabatic expansion, and blowing as a jet against the free surface of a molten mass of said matrix metal.