We synthesized carbon-coated iron magnetic nanoparticles by a low cost method using Ferric nitrate as the iron precursor and starch as both reductive agent and carbon source under H2 atmosphere. The structure, size distribution, phase composition, magnetic properties and oxidation resistance of the particles were investigated by transmission electron microscopy, X-ray diffraction, vibrating sample magnetometry and differential scanning calorimetry. The results show that the carbon-coated iron nanoparticles are spherical particles with a diameter of 20-40 nm. They are particles of core-shell structure with an iron core inside and an onion skin carbon layer outside, carbon layer can protect inner iron core from been oxidized, the hysteresis curves show that they are super paramagnetic materials. At the same time the annealing can change the magnetic properties of carbon coated iron nanoparticles.