On the basis of experimentally obtained data, it was established that submicron-size bubbles are formed by the internal oxidation of Cu-C composite with fine dispersed graphite particles. They are homogeneously distributed in the Cu-matrix. This process starts with the dissolution of oxygen into the metal at the free surfaces, and continues with the diffusion of oxygen atoms into the volume of copper crystal lattice where they react with the graphite particles. The reactions of dissolved oxygen with carbon yield the gas products (CO2, CO), which cannot be dissolved in the crystal lattice of the matrix. The gas molecules, which are enclosed in the space previously occupied by the graphite, have a greater specific volume than the solid graphite. Consequently, compressive stresses arise in the copper matrix around the bubbles. The interaction of these stress fields with gliding dislocations during loading could improve the mechanical properties of the copper. The internal oxidation kinetic in Cu-C composite depends on the diffusion of oxygen in the copper matrix, and the penetration depth of the internal oxidation front indicates the parabolic nature of the process.