A novel alcohol fuel cell is constructed by using Fe3+ as the oxidation agent instead of the conventional O2. Various alcohols as the fuels are tested, including methanol, ethanol, n-propanol and iso-propanol. In this fuel cell, the anode catalysts tested are PdSn/β-cd-CNT, PdSn/CNT, Pd/β-cd-CNT, Pd/CNT and Pd/β-cd-C, prepared by using multi-walled carbon nanotube (CNT) and carbon powder (C), as well as β-cyclodexdrin (β-cd) modified CNT (β-cd-CNT) and β-cd modified C (β-cd-C), as the substrates to immobilize PdSn and Pd nanoparticles in glycol solvent. The as-synthesized PdSn/β-cd-CNT catalyst presents significantly higher electroactivity for alcohol oxidation than the conventional Pd/C catalyst. Fe3+ reduction reaction is carried out on the cathode made of carbon powder. The anolyte (alcohols in 1 mol L−1 NaOH) and catholyte (Fe3+ in 0.5 mol L−1 NaCl) are separated with a Nafion 117 membrane. Open circuit voltage (OCV) of the cell with the anode PdSn/β-cd-CNT is 1.14–1.22 V, depending upon the used alcohol. The maximum power densities with methanol, ethanol, n-propanol and iso-propanol fuels are 15.2, 16.1, 19.9 and 12.2 mW cm−2, respectively.