Nanocrystalline alpha-Fe2O3 thin films prepared by sol-gel processing were used for studying the variation of electrical resistance with changes in humidity. The resistance of these films decreased by an order of 3 from dry (20%) to humid (85%) conditions. The sensitivity to humidity decreased with increasing temperature as well as with grain size. A sudden increase of resistance from 1.2 x 10(8) Ohm to 1.6 x 10(10) Ohm was observed for a film of grain size similar to 30 nm at 100 degrees C. The reaction between water and lattice iron was found to be reversible, suggesting the reusability of the films.