Ba0.6Sr0.4TiO3 (BST) ceramic materials have been widely used in the field of multilayer ceramic capacitors. Surface modification through the surface coating to form a heterogeneous layer could effectively improve the dielectric properties. In this work, BST powders were prepared by a co-precipitation method. The effects of reaction conditions on the microstructure of the BST powder were investigated. The reaction temperatures significantly affected the morphology of BST powder, and the rhombic-type particles were obtained with the reaction temperature around 80 °C. Meanwhile, the BST@Fe2O3 was prepared by the chemical precipitation method using BST powders with rhombic-type microstructure as “core”, and the so-called “core-shell” microstructure was confirmed in the BST@Fe2O3 powder. Then, BST@x wt%Fe2O3 (x = 2.5, 5, 7.5, and 10, denoting the different content of Fe2O3) ceramics were further prepared, and the influence of “core-shell” structure on the phase structure, microstructure, and dielectric properties was investigated. With the increasing of Fe2O3 content, the ferroelectric–paraelectric phase transition temperature shifts toward lower temperatures, and dielectric peaks gradually become broad and frequency-dependent, which may be due to inconsistent chemical composition from core to shell.