We have undertaken a systematic study of the effect of Fe3+ doping on the crystal structure, magnetic, electrical transport and magnetoresistance properties of La0.67Sr0.33Mn1−xFexO3 (0≤x≤0.15) polycrystalline coatings prepared by the sol-gel and screen printing method. The X-ray powder diffraction and Reitveld refinement results indicate that the partial substitution of Mn3+ ions by Fe3+ ions does not introduce noticeable lattice distortion and structural transition. Magnetic measurements show that Fe3+ ions significantly lowers the Curie temperature, and the magnetization at low temperatures first increases and then decreases with further Fe3+ doping. The Fe3+ doped manganites (x>0.05) are semiconductors with high resistivity, as the consequence of low number of available hopping sites of charge carriers. The most stimulating result obtained is that the magnetoresistance property is greatly enhanced around the percolation threshold (x=0.05) of Fe3+ ions in this system and the percolative phase separation is responsible for the anomalous behavior.