In this study, the pure iron powder was treated with aqueous phosphoric acid to produce phosphate insulating layer on the surface. After drying the powder, it was compacted in a mold with a diameter of 20mm at 800MPa. The powder compacts were then heat treated at for 1 hour. The results showed that insulated iron powder was obtained with uniform phosphate layer by chemical reaction. With increased amount of phosphate layer, the core loss and density of compacts were decreased. It was also found that the addition of ethyl alcohol during insulating reaction resulted in improved core loss value.