A novel graphene-encapsulatedα-Fe₂O₃hybrid was synthesized through the first hydrolysis process of Fe3+ ions in the colloidal solution of graphene oxide (GO) and following hydrothermal procedure. The energy dispersive X-ray spectrometry (EDS) data proved the existence and uniform distribution of C element in the hybrid. We further demonstrated the successful encapsulation ofα-Fe₂O₃grains by extremely small graphene pieces through transmission electron microscopy (TEM). As a proof-of-concept demonstration of the function, the as-prepared samples were utilized as gas-sensing materials to explore their potential applications. Results showed that the optimal hybrid exhibited a response of 8.2-5 ppm of NO₂at room temperature (RT), which was 3.9 times higher than that of undopedα-Fe₂O₃(125℃). The hybrid sensor also displayed a short response time of 2.1 min, an excellent NO2 selectivity, a long-term stability of 20 days and an extremely low detection limit of 50 ppb toward NO₂at RT. The significantly enhanced NO₂sensing properties could be attributed to much higher specific surface area, more defects and local p-n heterojunctions in the hybrid. We consider that our work could provide a fresh idea for the future design of high-performance room temperature gas sensors.