A method for fabricating fine reduced iron powders comprises the following steps: heating fine iron oxide powders having a mean particle size of smaller than 20 μm to a reduction temperature of over 700° C. to reduce the fine iron oxide powder into iron powders that are partially sintered into iron powder agglomerates; and performing a crushing-spheroidizing process on the iron powder agglomerates to obtain individual iron powders having a mean particle size of smaller than 20 μm. The method can reduce iron oxide powers into iron powders having a rounded shape and a high packing density and a high tap density, which are suitable for the metal injection molding process and the inductor fabrication process. The reduced iron powder may further be processed using an annealing process and a second crushing-spheroidizing process in sequence to further increase the sphericity, packing density, and tap density of the reduced iron powder.