The design and synthesis of nanomaterials with high gas sensing property have been given extensive attention to satisfy future societal and environmental needs. Herein, a facile hydrothermal method is developed to prepare the Fe 2 O 3 nanoparticles in the presence of graphene sheets; afterwards, a heat treatment process is performed for producing well-dispersed Fe 2 O 3 nanoparticles along with the elimination of graphene sheets. The investigation on the evolution process reveals that the presence of graphene is critical for not only preventing agglomeration of Fe 2 O 3 nanoparticles but also keeping Fe 2 O 3 nanoparticles in small sizes. The obtained Fe 2 O 3 nanoparticles with the aid of graphene present excellent gas sensitive performance (more than 4.0 times to 1000ppm of ethanol than that of pure Fe 2 O 3 obtained without graphene) toward ethanol, indicating the potential applications as sensor material towards ethanol detection.