Steelmaking slags are usually processed for iron recovery by dry magnetic separation. The recovered iron-rich products are recycled back into the ironmaking and steelmaking processes to replace high-cost steel scrap and iron ores. However, current slag processing is far away from optimum conditions, especially for slag fines with small particle sizes, resulting in generation of nonrecyclable “metallic” slag fines with insufficient iron content and great iron loss in “nonmetallic” slag fines with excessive iron content. In this research, the authors aimed at enhancing iron recovery from the steelmaking slag fines by process optimization of upgrading the slag fines with dry magnetic separation. The key operating parameters considered in the upgrading process included magnetic drum radius, drum rotation speed, surface magnetic field strength, gradient of the field strength, and splitter position. The first four operating parameters were first combined into a compound variable which represents separation capability (SC) of a magnetic drum separator. Effects of separation capabilities and splitter positions on the separation of steelmaking slag fines were then tested on five different samples of steelmaking slag fines. At last, optimization of the upgrading process on a pilot magnetic drum separator was conducted to maximize recycling ratio of the steelmaking slag fines by adjusting SC and splitter position of the magnetic drum separator.