<p>Previous researchers’ efforts have focused on hybrid nanocomposites comprising transition-metal-oxide nanoparticles and carbon frameworks, polymers, and semiconductors for energy conversion, photocatalysis, and sensing applications. In order to accomplish that, α-Fe₂O₃ (hematite) emerged as the vital component for this research. Utilizing first-principles density functional theory (VASP, GGA + U) we elucidate the structural and properties differences between α-Fe₂O₃ at bulk and nanoscale levels and how these vary with nanoscaling. Our results indicate surface relaxation, with lattice contraction and bond shortening in the nanometer-scale model. In addition, effective stiffness means lower nanoscale elastic response and softening but higher compliance. Through optical analysis, dielectric response and refractive index increase with quantum confinement, as does optical band gap and blue-shifted absorption edge. Such results will also help in the design and synthesis of hematite-based hybrid nanocomposites with superior light-harvesting, photocatalytic reactivity, and sensor responses.</p> Graphical Abstract <p></p>