Transparent semiconductor CuAlO2 in nanodimension was prepared by mechanical alloying of Cu2O and α-Al2O3 powders in toluene medium. The formation of single phase CuAlO2 with an average crystallite size of 45 nm was confirmed by x-ray diffraction analysis. The nanocrystalline nature of CuAlO2 was confirmed by atomic force microscopy. Frequency-dependent dielectric property measurements and the relaxation behavior were studied using impedance spectroscopy. Dielectric relaxation time estimated from the modulus curves was found to be decreasing with increase in temperature. The existence of stretched exponent parameter β≪1 in the present nanocrystalline CuAlO2 implies non-Debye type relaxation behavior in this material.