The mechanism and kinetics of the reduction of hematite to magnetite in a laboratory-scale, micro-fluidized bed reactor were isothermally investigated. The procedure consisted of the isothermal heating in a flow of a 20%CO–80%CO2 mixture at temperatures from 500 °C to 600 °C. It was found that the Avrami–Erofe’ev model of nucleation and 1D growth (n = 1.58) successfully described the phase transition of hematite to magnetite, and the value of activation energy ΔEa of the reaction was estimated to be 48.70 kJ/mol. The microstructure properties for specimens with different conversion degrees were analyzed using the Brunauer, Emmett and Teller (BET) method and scanning electron microscopy (SEM). The results showed that the magnetite nuclei were needle-like, and the hematite specimens became thoroughly porous after complete reduction to magnetite. The physical and chemical processes of the reaction were also discussed.