The Al-10 wt% Ni alloy was prepared by Controlled Diffusion Solidification (CDS) technology with samarium (Sm) modification. This study systematically investigated the effects of CDS on microstructure evolution and thermo-physical properties, while elucidating the underlying mechanisms of CDS and modification. Experiments demonstrated that CDS effectively refines the primary Al3Ni phase through the generation of abundant nucleation sites, achieved via subnormal cooling coupled with intensive melt agitation. CDS alone achieved an 80.2 % size reduction in primary Al3Ni phase and changed the shape factor from 10.7 to 3.2, thereby enhancing ultimate tensile strength and thermal conductivity. The introduction of samarium (Sm) modifier into the melt prior to CDS demonstrated superior efficacy. This hybrid approach synergistically enhanced both mechanical and thermal properties, yielding an ultimate tensile strength increase from 158.8 to 173.3 MPa, an elongation improvement from 8.9 % to 19.0 %, and a 12.2 % elevation in thermal conductivity from 193.0 to 216.5 W/(m·K). The CDS processed alloy exhibits homogeneous microstructure and optimized thermo-physical properties render it ideal for advanced thermal management systems.