The microstructure evolution of dilute Al-Fe alloys processed by High-Pressure Torsion (HPT) was studied in detail with special focus on the phase identification, phase distribution and orientation relationships between phases by high-resolution scanning/transmission electron microscopy (HR-S/TEM) and on structural analyses by X-ray diffraction (XRD). The alloys were characterized after HPT and subsequent aging treatments. Microstructures were well controlled for cast samples with 2wt%Fe containing a mixture of α-Al phase and eutectics of Al3Fe and Al6Fe. Supersaturation of Fe was achieved in the ultrafine-graincd matrix, and successive aging led to a very fine dispersion of the intermetallic phases. The electrical conductivity after the aging treatments was significantly recovered to well over 50%IACS while simultaneously increasing the yield strength above 600 MPa via precipitation of dissolved Fe. These results show that even with low Fe fraction it is possible to improve mechanical and electrical properties of A1 alloys for further advanced applications.