Fe2O3/graphene composite was synthesized by a facile hydrothermal method. SEM and TEM characterizations show that Fe2O3 particles with size of 40–60nm distributed uniformly on the surface of the graphene. As an anode material for Li-ion batteries (LIBs), Fe2O3/graphene delivered discharge and charge capacity of 1369mAhg−1 and 899mAhg−1 respectively in the first cycle with an initial Coulombic efficiency of 65.7%, which was much better than the bare Fe2O3 nanoparticles electrode. Enhanced rate capacity and cycling stability were also observed for Fe2O3/graphene composite. A capacity of 559mAhg−1 was maintained after 50 discharge–charge cycles. Uniform dispersion of Fe2O3, high conductivity and specific surface area were responsible for the enhancement of electrochemical property. Electrochemical impedance spectrum results revealed that the improved electrochemical performance of Fe2O3/graphene can be attributed to fast migration of Li+ through surface film and charge transfer on active material/electrolyte interfaces. The synthesis approach presents a promising route for large-scale production of Fe2O3/graphene composite as electrode materials for Li-ion batteries.