Hydrogen generation by reaction of aluminum (Al) with water is generally hindered by the presence of the dense oxide layer on its surface. Eliminating or activating the passive oxide layer is a key step for improving the hydrolysis reactivity of aluminum to generate hydrogen. In the present investigation, a gel-coating method was used to prepare the precursor powder of a composite with alumina (Al/Al2O3) to clarify the effect of the Al2O3 additive on the hydrolysis of Al powder. The results showed that γ-Al2O3 was formed after the heat treatment of the Al/Al2O3 composite precursor at 550 °C for 4 h, which results in the coating of Al particles with γ-Al2O3 agglomerates. The XPS analysis of the heat-treated Al particles indicated that the initial dense oxide layer covered on the surface of Al particles transformed into a loose γ-Al2O3 layer that increased the hydrolysis reactivity of the Al powder. The Al2O3 additive coated on the surface of the Al particles was found to lower the hydrolysis reactivity of the Al particles. It was concluded that the heat treatment rather than the addition of the γ-Al2O3 additive is the predominant factor in determining the hydrolysis reactivity of the Al particles. However, it was observed that coating the Al particles with Al2O3 did hinder the degradation of the Al hydrolysis reactivity upon exposure in air for several days.