A raw material for powder metallurgy contains at least 0.5 vol % and at most 10 vol % of alumina powder of which the sieve fraction with a sieve opening of 30 .mu.m is at most 0.1 wt %, and a remaining part of aluminum alloy powder. The moisture content of the alumina powder is at most 0.15 wt. % with respect to the alumina powder. Agglomeration of particles is thereby minimized or avoided. Highly reliable raw material for powder metallurgy having superior fatigue strength, impact resistance and wear resistance can be obtained. A method of preparing such a mixed powder raw material involves air classifying the powder materials, dry ball mixing the materials, and then annealing the mixed powder.