The U.S. Environmental Protection Agency (EPA) has proposed initial regulations to control mercury (Hg) emissions from coal-burning utilities, the primary source of airborne Hg emissions in the United States. Promising new techniques in capturing Hg involve transformation of elemental Hg into a product that is much more easily collected using conventional air pollution collection devices. In this study, the removal ability of high surface area iron oxide (Fe2O3) nanoparticles prepared on solid glass beads by a dry mechanical coating process was examined. The experimental results showed different mechanisms responsible for the removal depending on the air composition. In pure air, the Fe2O3 nanoparticles adsorbed and desorbed, while in the presence of nitrogen dioxide (NO2) they took on a catalytic role. The maximum specific capacity observed in this study was 1528 μg Hg/g Fe2O3. This study also identified the effective temperature range (180–320°C) for Hg removal, with the optimal temperature being ~260°C. The study reveals the important role of metal oxides in Hg chemistry in combustion systems through heterogeneous oxidation, and demonstrates the potential of Fe2O3 nanoparticles as an alternative material to traditional control techniques, such as activated carbon for reducing Hg emissions from incinerators.