In2O3 and Fe-doped In2O3 nanowires (NWs) were prepared on a Si substrate by using the CVD method. Structure analysis showed that the preparation of Fe-doped In2O3 NWs formed the body-centered cubic structure, which is nearly consistent with that of the In2O3. Importantly, the characteristic peak at (222) and (400) of Fe-doped In2O3 shifted to high angle, owing to the ionic radii of Fe3+ ions (0.79 Å) is much smaller than that of In3+ ions (0.94 Å). Morphology showed that the nanowires, with diameters of 100–150 nm and lengths of tens to hundreds of micrometers, grew along the [100] direction with spacing distance at 0.506 nm. Fluorescence test results showed that the spectral peak of Fe-doped In2O3 nanowires shifted to 419 and 438 nm, 3 nm blue-shifted compared with that of In2O3 NWs in 416 and 435 nm. Thanks to the assessment of the first-principle calculations by using density functional theory, the crystal structures of In2O3 and Fe-doped In2O3 NWs have been designed. It can be found that the doped Fe3+ ions introduced the distortion of the crystal lattice and produced more oxygen vacancies in the crystal lattice, the total volume and valence charge is obviously decreasing from 128.46 to 105.51 and 88 to 78, respectively. Further research found that the doped Fe atoms lead to a smaller band gap, from 1.7 eV to around 0.7 eV, resulting in the blue shift of the PL spectrum. The distortion of the crystal lattice should be responsible for the decrease of the band gap of the In2O3 semiconductor. Thus, the formation of Fe-doped In2O3 NWs is facile and the assessment using first-principle calculations can offer a much deeper understanding of the influence of Fe ions on its photoluminescence property.