This study highlights a novel method and mechanism for the rapid and effective milling of carbon fibers (CFs) in silicon carbide (SiC) powder, and also the dispersion of CFs in SiC powder. The composite powders were prepared by chopping and exfoliation of CFs, and ball milling of CFs and SiC powder in isopropyl alcohol. A wide range of CFs loading, from 10 to 50 vol%, was studied. The milling of CFs and SiC powder was checked by measuring the average particle size of the composite powders. The dispersivity of CFs in SiC powder was checked through scanning electron microscope. The results show that the usage of exfoliated CF tows resulted in a rapid and effective milling of CFs and SiC powder. The results further show an excellent dispersion of CFs in SiC powder for all CFs loading without any dispersing agent.