A hybrid material of carbon-coated Fe2O3 submicro-particles loaded on graphene nanosheets (Fe2O3@C/GNs) is prepared by a two step route including a hydrothermal and a subsequent glucose impregnation-pyrolysis process. The obtained material is composed of GNs and ∼400 nm size Fe2O3 particles coated by thin carbon layer with a thickness of 5 nm. As an anode material for lithium ion batteries, Fe2O3@C/GNs hybrid shows an improved electrochemical performance in the initial coulombic efficiency (71%), reversible capacity (900 mA h g−1 after 50 cycles at a current of 200 mA g−1) and capacity retention rate (82% after 50 cycles). This result is much better than the synthesized bare Fe2O3 and Fe2O3/GNs electrodes. In addition to the contribution of GNs, the carbon-coated layer around Fe2O3 particles is believed to be a key factor to improve the electrochemical performance of Fe2O3.