The effect of activation and reaction treatments on the resulting phase transformations in a commercial, precipitated, and spray-dried Fe2O3-CuO-K2O Fischer-Tropsch catalyst has been studied. The catalyst was activated in flowing H-2, CO, and a H-2/CO = 0.7/1.0 mixture. The pretreatment method caused these catalysts to exhibit significant differences in their catalytic activity for CO hydrogenation. The microstructure of these catalysts was studied by electron microscopy and other bulk and surface characterization techniques to understand the phenomena responsible for these differences. We observe that magnetite transforms into carbide as the catalyst is activated, causing the crystals of magnetite to break down into smaller crystallites of the carbide phase. Deposition of carbon on the carbide surface causes the carbide crystallites to further separate from each other. Our results suggest that magnetite has negligible catalytic activity for FT synthesis whereas carbide formation is necessary before the catalyst becomes active. The extent of transformation into carbide correlates well with catalyst activity during the activation step.