In order to further improve utilization efficiency of Bayan obo Fe-Nb-RE complex deposit, selective reduction of Nb-bearing iron concentrate was achieved by using a reduction processes in reaction cylinder which is heated in tunnel kiln. The experiments were focused on investigating effects of reduction temperature and time on the reduction dynamics of Nb-bearing iron concentrate. The results show that the temperature at the centre of reaction cylinder is lower than its peripheral temperature. The local metallization ratio of the produced sponge iron ring varies from high, to low and to high level along its radius direction. With reduction temperature increasing, the metallization ratio of produced sponge iron is proportionally increasing, and the outer diameter of the sponge iron ring is gradually decreasing. The metallization ratio of the produced sponge iron is gradually increasing with the increase of reduction time.