The evolution of the oxidation of ultrafine (5 nm diameter) alpha-iron particles in ambient air has been studied using Mossbauer spectroscopy and electron microscopy. A 1-2 nm thick oxide layer was found to appear almost immediately, whereafter the oxidation proceeded rather slowly. The rate of oxidation can be understood from the Caberra-Mott model of oxidation of metal surfaces. The oxide formed consists of a mixture of Fe3O4 and gamma-Fe2O3, but with the magnetic properties significantly modified due to the finite size of the oxide crystallites, e.g. the magnetic hyperfine fields are somewhat smaller than for the bulk Fe3O4 and gamma-Fe2O3, and a very strong spin-canting was revealed. A Verwey transition was found to occur between 12 and 80 K. The Debye temperature of the oxide layer was found to be about 185 K for the thinnest observed oxide layer, increasing to about 215 K after exposure of the a-iron particles to air for one week.