A supersaturated spinel solid solution having a nominal compositional ratio of Mg/Al/Fe = 0.5:1.0:1.5 was prepared using a conventional solid-state reaction at 1573 K in air followed by quenching in ice water. The formula of the resulting spinel structure compound (the spinel) was determined to be (Mg0.50AlFe0.262+Fe1.243+)0.97O4 based on a Rietveld refinement and thermogravimetry, indicating a cation-deficient spinel structure having mixed valences of Fe. This spinel was found to decompose to γ-Fe2O3 and a modified, Fe-poor spinel structure compound via a spinodal decomposition below 855 K. The spinodal temperature was estimated using the sidebands appearing in X-ray diffraction patterns in addition to the temperature dependence of magnetization values. This spinodal decomposition was accompanied by the oxidation of Fe2+ to Fe3+ and produced a unique grid-like microstructure (with a grid width of approximately 25 nm) along with enhancement of the saturated magnetization of the material. A sample cooled to room temperature in a furnace after heating at 1573 K in air had a lamella structure having a width of approximately 0.1 μm and comprised particles with a mixture of γ-Fe2O3 and the Fe-poor spinel compound on their surfaces. Subsequent heating of this same material to 1373 K in air formed ε-Fe2O3 in the particles. The crystallographic relationship between ε-Fe2O3 and the modified spinel structure compound was aε // [112̅]s, bε // [1̅10]s, and cε // [111]s (where ε and s indicate the ε-Fe2O3 and spinel, respectively).