A simulation model of a small-scale solid oxide iron–air battery system was developed to clarify its fundamental characteristics and feasibility from the view point of energy efficiency. The energy flow in one cycle of charge/discharge operations was evaluated under a quasi-state assumption with 0-dimensional models of the system components, i.e., a solid oxide electrochemical cell, an iron (Fe) box and heat exchangers. Special care was taken when considering thermal aspects; not only a simple system but also a more complicated system with thermal recirculation by three heat exchangers was investigated. It was found that the system round-trip efficiency reaches 61% under the base conditions in this study. The results also show that several limitations exist for the operation parameters and conditions in view of practical applications. In particular, higher and lower limits exist for the fuel and air utilization factors under which the system operates effectively because of constraints such as the maximum allowable fuel-blower temperature and no heat input during the discharge operation.