The process of formation of iron fine particles from goethite microcrystals was investigated by means of powder X-ray diffraction, gas adsorption, and electron microscopy. In the first process, microporous hematite particles were prepared by decomposing goethite particles. The pores formed in hematite particles were slit-shaped (width : 0.9 nm). In the second process, microporous hematite particles were reduced at 250-350°C under the flow of hydrogen gas, and the reduction degree R (%) was determined. In the sample of R=8%, mesopores of 4 - 8 nm were formed by aggregation of slit-shaped micropores, but the skeleton of acicular particles was not significantly altered. With the progress in reduction, a number of crystallites were formed in the parent particles together with growth of pore size. In the sample of R=72%, the crystallites were separated from the parent particles. Finally, the separated crystallites sintered to give granular iron particles having low coercivity of 375 Oe. It was found that alumina or silica gel coated on the surface of goethite particles was remarkably effective for preventing the separation and sintering of crystallites formed in the parent particles. The silica-coated iron fine particles consisting of the crystallites which were as large as single domain particles showed excellent acicular shape and high coercivity of 1600 - 1700 Oe.