Mechanical alloying has been performed in Ag-Cu immiscible alloy system with five different compositions. X-ray diffraction analysis was carried out to determine the structural characterization of the milled powders.Lattice constants of the milled powders were determined and the solubility for Ag in Cu was calculated. The results demonstrated that MA indeed produced a face center cubic (f. c. c. ). Cu-based Cu-Ag solid solution and the solid solubility has been extended to x(Ag)= 30% for Ag in Cu when the grain size of Cu-based Cu-Ag solid solution is about 10 nm after MA. There is a three-phases co-existence during the process of MA in this alloy system which agrees well with other experimental and theoretical results. Based on the experimental results a formation model was proposed in this paper to understand the formation of Ag-Cu solid solution during MA.