Magnetic core components are often made from laminated sheet steel, but they are difficult to manufacture in near net shape, resulting in large core losses at higher frequencies. In this study, the pure iron powder was treated with aqueous phosphoric acid to produce phosphate insulating layer on the surface. After drying the powder, it was mixed with 0.5wt% Zn stearate and compacted in a mold with a diameter of 20mm at 800MPa. The powder compacts were then heat treated at 500°C for 1 hour. The results showed that insulated iron powder was obtained with uniform phosphate layer by chemical reaction. With increased amount of phosphate layer, the core loss and density of compacts were decreased. It was also found that the addition of ethyl alcohol during insulating reaction resulted in improved core loss value.