MgO insulation coating with thickness of ca. 50nm was evaporated on the surface of iron powder and fabricated soft magnetic composite(SMC) with low iron loss. The MgO insulation coating had greater heat resistance than conventional phosphate insulation coating, which enabled stress relieving annealing at higher temperature (600C). Electrical and magnetic properties of SMC was examined. The electrical resistivity of the SMC annealed at 700C was 21μΩm. The iron loss at 50Hz for Bm = 1.5T was 5.34W, which was 40% of conventional SMC and was at the same level with laminated steel plate (t0.35). These results show that MgO insulation coating has enough heat resistance and adhesiveness to powder surface to obtain SMC with low iron loss.