A process for fluidized catalytic cracking of heavy oils and production of hydrogen is described, comprising contacting steam and heavy oils with fluidized catalyst particles containing reduced iron at high temperatures, wherein a fluidized bed is formed such that the catalyst particles are fed from the bottom and withdrawn from the top of the fluidized bed and the fluidized bed is provided with a means for retarding the mixing rate of the catalyst particles in the vertical direction, to thereby generate a temperature difference between zones of the fluidized bed above and below said means, and use the upper zone for cracking of heavy oils and the lower zone for production of hydrogen. Catalyst particles withdrawn from the fluidized bed may be regenerated and recycled. Thus, light oils and hydrogen can be produced in high yields.