Hollow nanomaterials have attracted great interest because of their many applications in catalysis, nanoreactors, drug delivery systems, for lubrication and in gas sensors. Here, carbon sphere templates were prepared from glucose under hydrothermal conditions to facilitate the synthesis of hollow Fe2O3 nanospheres. Thermal decomposition of an iron precursor in benzylalcohol with the carbon spheres resulted in the deposition of Fe3O4 nanoparticles on the carbon sphere templates. The nanoparticles on the carbon surface naturally agglomerate and form a dense oxide shell during the calcination step, which produces typical Fe2O3 hollow structures. The gas sensing performance of the hollow Fe2O3 nanospheres was investigated at an operating temperature of 300 °C. The hollow Fe2O3 nanospheres showed high sensitivity (R = 10.766 at 1 ppm formaldehyde) with a linear response to formaldehyde gas concentration in the range of 0.8~2.4 ppm, and good selectivity to formaldehyde gas in volatile organic compounds, compared to commercial Fe2O3 nanoparticles.