Experimental results performed with a fluidized-bed reactor supported the feasibility of the three processes including direct reduction of iron oxide by char, H-2 production by the steam-iron process, and the oxidation of Fe3O4 resulting from the steam-iron process to the original Fe2O3 by air. Chars resulting from a Chinese lignite loaded with K2CO3 were used successfully as a reducing material, leading to the reduction of Fe2O3 to FeO and Fe for the steam-iron process, which was confirmed by both the off-gases concentrations and X-ray diffractometer analysis. The reduction of Fe2O3 by K-10-char at 1073 K is desirable from the perspective of the carbon conversion rate and high concentration of CO2. The carbon in char was completely converted to CO2 when the mass ratio of Fe2O3/K-10-char was increased to 10/0.3. The oxidation rate of K-10-char by Fe2O3 without a gasifying agent was comparable to the K-10-char steam gasification rate. The fractions of FeO and Fe in the reduced residue were 43 and 57%, respectively, in the case of 3 g of Fe2O3 and 0.5 g of K-10-char, which was verified by the total H-2 yield equaling 1000 mL/g K-10-char from the steam-iron process. The time that it took to achieve complete oxidation of Fe3O4 to Fe2O3 by air with an 8.7% O-2 concentration at 1073 K was about 15 min.