Iron-based metal/ceramic nanocomposite materials have attracted increasing attention owing to their outstanding mechanical, electrical, and magnetic properties with potential applications in many industrial fields. However, several technical routes, such as mechanical alloying, sol-gel, and electrodeposition, have limitations, including lengthy synthesis processes, complex experimental equipment, and expensive raw materials. In view of the urgent demand for high-quality iron-based metal/ceramic magnetic nanocomposites, Fe-Y₂O₃ nanocomposite powders with different Y₂O₃ contents (mass fraction) have been prepared using a combustion-based route. The effects of the Y₂O₃ content on the microstructure, grain size, and magnetic and sintering properties of the nanocomposite powders were examined. The Fe-Y₂O₃ nanocomposite powders exhibited a connected network structure composed of nanoparticles regardless of the Y₂O₃ content, but the grain size decreased gradually with increasing Y₂O₃ content. The magnetic performance test showed that the iron nanopowder without Y₂O₃ had a saturation magnetic induction and coercivity (H_c) of 1.97 T and 6.4 kA/m, respectively. The saturation magnetic induction of the Fe-Y₂O₃ nanocomposite powders decreased gradually with increasing Y₂O₃ content, whereas the H_c increased. The saturation magnetic induction and H_c of the Fe-Y₂O₃ nanocomposite were 1.45 T and 58.9 kA/m, respectively, at a Y₂O₃ content of 2%. The as-synthesized Fe-Y₂O₃ nanocomposite powders were densified by pressureless sintering. When the Y₂O₃ content was low, the nanocomposites could reach a higher relative density at a lower sintering temperature of 700^oC. In contrast, densification was difficult to achieve when the Y₂O₃ content was increased to 1% or 2% even at a high sintering temperature of 1300^oC.