In this work, Fe2O3 nanoparticles (NPs) were successfully synthesized by Pechini sol-gel method. Scanning electron microscopy, transmission electron microscopy and X-ray diffraction characterizations were used to study the morphology and crystal structure of the synthesized products. The electrical and gas sensing behaviour of the synthesized and commercial Fe2O3 samples, prepared in the form of thick films, were studied. Though the commercial Fe2O3 powders had lower resistance but it was found that the synthesized Fe2O3 NPs had better gas sensing properties. The underlying mechanisms are discussed in details. The present findings show advantages of Fe2O3 NPs over micro-size particles for gas sensing applications.