The preparation of nanocrystalline hematite, ${alpha}-Fe_2O_3$, paricles and their surface coating with silica layers are described. The hematite particles with the size of 30~60 nm are firstly prepared by thermal decomposition of trinuclear acetate-hydroxo iron (III) nitrate complex, $[Fe_3$(OCOCH_3)_7$OH${cdot}$2H_2O]NO_3$</TEX>, at $400^{circ}C$. Subsequently the hematite surfaces are coated with siliva layers by a controlled hydrolysis and condensation reaction of TEOS with varying the TEOS concentration and pH. Monodispersed and spherical $SiO_2-coatedFe_2O_3$ particles with the average particle diameter of ~90 nm and extremely narrow size distribution can be obtained at the pH of 11 and the TEOS concentration of 0.68M, which are found to be the optimum conditions in the present study in achieving the homogeneous deposition of silica layers on hematite surfaces. Diffuse reflectance UV-Vis spectra reveal that the characteristic optical reflectance of ${alpha}-Fe_2O_3$ particles is preserved almost constant even after coating the surfaces, suggesting that the $SiO_2$ layers can be regarded as protecting layers without degrading the optical properties of hematite particles.