The evolution of ultrathin carbon layers self-doped by nitrogen assists the formation of α-Fe2O3 nanodots embedded in N-rich carbon sheets by a surfactant-less self-assembly approach and they are reported as anode materials for lithium-ion batteries. The resulting Fe2O3 nanodots confine to size of 3.7 nm with evenly embedding in a two-dimensional N-rich carbon sheets. As an anode material, the Fe2O3ND/NC electrode delivers a reversible capacity of 917 mA h g-1 at 0.1 C rate after 100 cycles and a good rate capability and long term cyclability of 476 mA h g-1 at 3 C rate after 325 cycles. Detailed investigation through the differential capacity (dQ/dV) and galvanostatic charge/discharge techniques reveal and distinguish the dual role of charge storage, i.e., faradaic and pseudocapacitive processes are involved in realizing improved electrochemical performances. The contribution of the pseudocapacitive capacity from the electrochemical processes accounts for 216 mA h g-1, which are due to the Li storages in both the tiny size Fe2O3 and the defective sites of N-doped carbon sheets as portrayed through a model schematic. Altogether, the report paves way for accomplishing multiple avenues, such as in-situ nitrogen doping, preparation of nanodots and ultrathin N-doped carbon sheets for applications in energy conversion and storage devices.