Nanostructured electrode materials have significant potential for boosting the electrochemical performance of secondary batteries. Fabrication of these nanomaterials with a facile and cost-effective route is crucial for their practical applications. Herein, α-Fe2O3 nanocrystals are prepared by a rather simple and low-cost one-step thermal decomposition method with FeSO4·7H2O and glucose as raw materials. When evaluated as anode material for lithium ion batteries, the α-Fe2O3 nanocrystals electrode exhibits a high reversible capacity of 1100 mAh g−1 at 1 A g−1 after 300 cycles; The long-term cyclability shows 690 mAh g−1 at 3 A g−1 after 800 cycles; Even when the current is increased to 10 A g−1, a comparable capacity of 406 mAh g−1 is retained. The microstructure and composition evolutions of the α-Fe2O3 electrode during cycling are analyzed by ex-situ field emission scanning electron microscope, transmission electron microscopy, Fourier transform infrared spectra, and X-ray photoelectron spectroscopy measurements. It is evidenced that the reversible interfacial lithium storage and pulverization of α-Fe2O3 nanocrystals are contributors to the enhanced capacity upon long-term cycling. When applied in a full cell lithium ion battery, the α-Fe2O3 nanocrystals electrode still display a high capacity and good cycling stability.