An aluminum matrix composite with dispersed carbon nanotubes (CNTs) was produced via flake powder metallurgy using a micro-rolling process and vacuum hot pressing (VHP), followed by conventional rolling using a macro-rolling process. The microstructure and mechanical properties of the produced composites were studied. In addition, a new quantitative model was introduced to study the dislocation density based on the microstructural parameters. The results revealed that the distribution characteristics of the CNTs in the Al matrix and the Al-CNT interfaces were the two main governing parameters of dislocation density. Moreover, the dependence of dislocation density on the geometry of the grains and crystallographic texture was shown in this model. The microstructural evolution revealed that a lamellar grain structure had been achieved, with a high capacity for the storage of dislocation. A uniform distribution of CNTs with high bonding quality was also seen in the final microstructure.