An improved continuous process for alkylation of isoparaffins with olefins to yield a product which includes a large proportion of highly branced paraffins for making gasoline having improved octane is taught. The improved process comprises contacting isoparaffins and olefins with a composite catalyst comprising a Lewis acid and a non-zeolitic inorganic oxide in the presence of a controlled amount of water. The process results in reduced catalyst aging and obviates environmental problems associated with prior art processes.