Nanostructured α-Fe2O3 was synthesised by a simple molten salt process using FeCl2·4H2O as a starting material and LiNO3–LiOH·H2O–H2O2 as a eutectic mixture at 300°C. To synthesise α-Fe2O3/C composite, both α-Fe2O3 and malic acid were dispersed together in toluene, where malic acid was used as a carbon source. The morphology and microstructure of both compounds were confirmed by X-ray diffraction, Raman spectroscopy and transmission electron microscopy. Electrochemical testing, including constant current charge–discharge and cyclic voltammetry (CV), was carried out. The α-Fe2O3/C composite anode exhibited much better electrochemical performance than the bare α-Fe2O3. The discharge capacities of the composite were measured to be 2112mAhg−1 at C/2 after 100 cycles and 584mAhg−1 at 20C after 10 cycles. The superior electrochemical performance of α-Fe2O3/C composite can be mainly attributed to the combined effects of the nanostructure, the carbon layering on the α-Fe2O3 nanoparticles, and the porous ultra-fine carbon matrix, where the three factors would contribute to provide high electronic conductivity, reduce the traverse time of electrons and lithium-ions, and could also prevent high volume expansion of the anode film during cycling. Our results indicate that the prepared α-Fe2O3/C nanocomposite is a very promising anode material for Li-ion power batteries.