Carbon coated hollow alpha-Fe2O3 spheres were prepared via a facile two-step hydrothermal method. The appearance and crystalline structure of the samples were characterized by scanning electron microscopy (SEM), X-ray diffraction (XRD) and transmission electron microscopy (TEM). The morphology showed that the hollow spheres were composed of well crystallized nanoparticles after the first hydrothermal reaction and subsequent calcinations. A thin carbon film was coated on each Fe2O3 nanoparticles after the second hydrothermal procedure. This carbon coating was probably beneficial to maintain the microstructure of the active material during repeatable lithiation and delithiation. Afterwards, the samples were assembled into half-cells to investigate the electrochemical properties. The electrode delivered relatively high initial discharge/charge capacities of 1291/890 mA h g(-1) at the rate of 0.3 C. The reversible capacity maintained very well in a prolonged 140 cycles. The capacity retention was 89% after 70 cycles, and that was 81% after 140 cycles. This exceptional lithium storage property was probably attributed to the porous and hollow structure which allowed the penetration of electrolyte to the inner of the electrode, the nanoscale Fe2O3 particles which shortened the migration pathway for lithium ion, and the carbon coating which kept the active materials structure intact. The attractive electrochemical performance suggested the carbon coated hollow Fe2O3 spheres would be the potential anode material for future lithium ion battery.