Complex refractory hematite with abundant reserves plays an significant role in the development of global iron and steel industry. In this study, the thermodynamics, phase transformation and microstructure evolution mechanism of complex refractory hematite in coal-based reduction process were systematically investigated using HSC software, X-ray diffraction (XRD), scanning electron microscopy (SEM) and energy-dispersive spectrometry (EDS). The results show the products with total iron grade, iron recovery and metallization rate of 85.67%, 87.82% and 85.82% were obtained respectively under the optimum conditions. The phases were selectively transformed in this order of Fe2O3 → Fe3O4 → FeO (Fe2SiO4, FeAl2O4) → Fe. Iron particles precipitated from gangue matrix in irregular shape and grew up in the form of small particles aggregating into large particles with the prolongation of reaction time. Metallic iron with smooth surface and high purity that gradually diffused on the matrix could be formed by increasing reduction temperature.