Fe powder particles were coated with ZnFe2O4 layer by in situ oxidation and then mixed with epoxy-modified silicone resin. Soft magnetic composites were prepared by compaction and annealing treatment of the coated powders. The coating layer was analyzed using Lorentz transmission electron microscopy, scanning electron microscopy and energy-dispersive spectroscopy X-ray analysis. Their magnetic properties were determined using a vibrating sample magnetometer and an auto-testing system for magnetic materials (SY8258B-H/m). The results show that the samples prepared at 1200 MPa and 550 degrees C exhibited distinguished magnetic properties, with low core loss of 497 W/Kg (100 kHz, 50 mT) and high amplitude permeability of 63 whose frequency stability is up to 170 kHz. The Fe SMCs with excellent soft magnetic properties provide great potential for application of various fields such as transformers, sensors and electromagnetic actuation devices.