Effective utilization of low-grade iron ore and coal can be one of the solutions for avoiding the high cost of raw materials and solving the problem of resource shortages in the steelmaking industry. This paper describes the behavior of reduction reaction during tar decomposition over low-grade iron ore. Pisolite ore, containing 5.9mass% of combined water, was dehydrated at 450°C to obtain porous ore. Tar vapor and pyrolysis gas of low-grade coal were introduced to porous ore for tar decomposition and carbon deposition. The iron ore effectively decomposed 22.1mass% of tar component into gas product and deposited carbon at 600°C. Besides tar decomposition, the ore was also reduced to magnetite and wustite by gas product which was produced from coal pyrolysis and tar decomposition. The reactivity of deposited carbon within ore was evaluated by reduction reaction using thermogravimetry method. The reduction of the carbon-deposited ore began at 750°C, while that of the reference mixture of Fe3O4 and coke began at 1100°C. The carbon-deposited iron ore was more reactive because nanoscale contact between iron ore and carbon enhanced reaction rate. These results revealed attractive utilization and reduction process of low-grade iron ore with coal tar decomposition.