Abstract: A direct reduction method was proposed which uses soda ash as the flux and coal as the reductant. By using this method hematite is reduced to iron, which can be recovered by magnetic separation, while Al₂O₃ is translated into sodium aluminate, which can be recovered from the solution. The effects of reduction temperature, reduction time, Na₂CO₃ dosage and reductant dosage on the grade of iron powder, the recovery of iron powder and the recovery of alumina were investigated on the basis of the single factor alteration principle. The process and reaction mechanism were studied by X-ray diffraction (XRD), scanning electron microscopy (SEM) and energy dispersive spectrometry (EDS). Orthogonal experiments were designed for optimizing the experimental parameters. Under the optimum condition of the reduction temperature of 1 150℃, the reduction time of 45 min, the Na₂CO₃ dosage of 40.47% and the reduetant dosage of 11.9%, the grade of iron powder is 95.88%, the recovery of iron powder is 89.92%, and the recovery of alumina is 75.92%.