Based on first-principle calculations and $k\cdot p$ model analysis, we show that the quantum anomalous Hall (QAH) insulating phase can be realized in the functionalized hematite (or $\alpha$-Fe$_2$O$_3$) nanosheet and the obtained topological gap can be as large as $\sim$300 meV. The driving force of the topological phase is the strong interactions of localized Fe 3$d$ electrons operating on the quadratic band crossing point of the non-interacting band structures. Such interaction driven QAH insulator is different from the single particle band topology mechanism in experimentally realized QAH insulator, the magnetic ion doped topological insulator film. Depending on the thickness of the nanosheet, topological insulating state with helical-like or chiral edge states can be realized. Our work provides a realization of the interaction-driven QAH insulating state in a realistic material.