The Fe2O3/SiO2 nanocompsites have been successfully prepared by sol-gel method using ferric chloride and tetraethylorthosilicate (TEOS) as precursors. The (10:90) Fe2O3:SiO2 molar ratio was prepared at 100 oC and 500 oC. The samples were examined by X-ray powder diffraction (XRD), FT-IR, UV-vis spectroscopy. The results confirmed that the increase of annealing temperature increase the aggregation of Fe2O3 nanoparticles and transformed from amorphous to the -Fe2O3 crystalline state. The optical measurements showed that the particle size of Fe2O3 prepared at 100 and 500 oC was 10 and 18 nm, respectively. The effect of increasing temperature on the electric and dielectric properties was analyzed. The results showed that the nanocomposite prepared at 500 oC has the highest conductivity value and dielectric constant. This explained according to particle size effect.