We report on the reversible manipulation of room temperature ferromagnetism in Fe (5%) doped In2O3 polycrystalline magnetic semiconductor. The X-ray diffraction and photoemission measurements confirm that the Fe ions are well incorporated into the lattice, substituting the In3+ ions. The magnetization measurements show that the host In2O3 has a diamagnetic ground state, while it shows weak ferromagnetism at 300 K upon Fe doping. The as-prepared sample was then sequentially annealed in hydrogen, air, vacuum and finally in air. The ferromagnetic signal shoots up by hydrogenation as well as vacuum annealing and bounces back upon re-annealing the samples in air. The sequence of ferromagnetism shows a close inter-relationship with the behavior of oxygen vacancies (V-o). The Fe ions tend to a transform from 3+ to 2+ state during the giant ferromagnetic induction, as revealed by photoemission spectroscopy. A careful characterization of the structure, purity, magnetic, and transport properties confirms that the ferromagnetism is due to neither impurities nor clusters but directly related to the oxygen vacancies. The ferromagnetism can be reversibly controlled by these vacancies while a parallel variation of carrier concentration, as revealed by resistance measurements, appears to be a side effect of the oxygen vacancy variation. (C) 2010 Elsevier B.V. All rights reserved.