Production of grey cast iron with improved mechanical properties and low cost is an import ante challenges of these engineering materials. In this study, AISI 1045 steel chips were used for reinforcing of hypoeutectic grey cast iron and microstructure and mechanical properties of composites produced by dry sand casting has been studied. A specimen without reinforcement and two composite specimens, respectively, with 1.5 and 3 volume percent of chips were produced. Microstructural studies were carried out by light and scanning electron microscopy. Noticeable region between steel chip-reinforcement and cast iron is observed that it is a diffusion interface. In the interface, carbon and .silicon are diffused from cast iron to steel chips and this case to form of a clear interface. To determine the mechanical properties of produced specimens are used for the tensile and hardness tests. Results were shown that reinforcing of cast iron by steel chips is resulted in to increase of the strength and hardness.