Hollow-structured α-Fe2O3/carbon (HIOC) nanocomposite with a high surface area of around 260 m2 g−1 was synthesized by a one-step, in situ, and industrially-oriented spray pyrolysis method using iron lactate and sucrose solution as the precursors. The small α-Fe2O3 nanocrystals were highly dispersed inside amorphous carbon to form a carbon nanocomposite. Electrochemical measurements showed that the carbon played an important role in affecting both the cycle life and the rate capability of the electrode. The HIOC composites showed the best electrochemical performance in terms of high capacity (1210 mAh g−1 at a current density of 0.1 C), enhanced rate capability and excellent cycle stability (720 mAh g−1 at a current density of 2 C up to 220 cycles). HIOC nanocomposite can also be used in other potential applications, such as in gas sensors, catalysts, and biomedical applications because it is easily dispersed in water and has a high surface area.