In this study production of fine particle Fe2O3 via microwave processing of Fe(NO3)3.nH2O followed by low temperature annealing was reported. XRD was used to characterize the structural properties of nanoparticles. Approximate particle sizes were between 3-13 nm according to Scherrer's equation. Single point BET measurement results also show that samples have large surface area and they are nanometer sized particles. TEM study was conducted to examine the structure of the nanoparticles. TEM figure is in good agreement with the results obtained from Scherrer's equation using XRD spectra. In order to characterize the magnetic properties of the nanoparticles VSM (Vibrating Sample Magnetometer) was used. From these results it can be concluded that the sample containing only maghemite phase exhibits superparamagnetic behaviour, on the other hand sample containing both hematite and maghemite phases shows paramagnetic behaviour above 300 K, superparamagnetic behavior at lower temperatures.