Iron nanoparticles were prepared by chemical vapor condensation (CVC) using iron pentacarbonyl, Fe(CO)5, as a precursor under inert Ar and He atmospheres in a flow reactor. Subsequently, the produced nanoparticles were heat-treated at different temperatures in air. The processes of the particle morphology and phase composition changes were studied. It was found that under the continuous thermal treatment the iron nanopowders were continuously transformed from oxide-coated iron via void magnetite to large hematite nanoparticles. It was shown that low temperature heat-treatment allowed to improve magnetic properties of the oxide-coated iron nanoparticles.