In the present work, sensing of ethanol on the ZnO thin films doped with Fe (5-50%) have been investigated. Nature of the sensing species in the nanosize Fe-doped ZnO (FeZnO) thin films has also been studied by in situ extended X-ray absorption fine structure (EXAFS) spectroscopy. By XRD, it is found that ZnO and ZnFe2O4 are the main compounds in the ZnO-Fe thin films. The thin film containing 5% of Fe has a high sensitivity (Rair/Rethanol>80) when sensing of ethanol at 300 K. On the contrary, the thin films with Fe fractions of 20-50% have a very low sensitivity to ethanol (Rair/Rethanol<15). In the presence of ethanol, the EXAFS spectra show that the bond distances of Zn-O and Fe-O in the thin films are 1.90 and 1.98 Å, respectively and restored to 1.91 and 1.97 Å in the absence of ethanol.