Both cage and noncage structures of (Fe(2)O(3))(n) (n = 2-6 and 10) clusters are studied using density functional theory. All the cage structures are stable without imaginary vibrational frequency but the global minima are the noncage clusters for most cases. Our results show that oxidation of Fe(4)O(n) (n<6) clusters by O(2) at room temperature is exothermic, while oxidation of n > or = 6 clusters is endothermic. This is in qualitative agreement with an experimental observation that only Fe(4)O(n) (+) (n > or = 6) clusters are produced in a laser vaporization source under saturated O(2) growth conditions. Since (Fe(2)O(3))(n) clusters have high stability and different structural and bonding properties from those of the bulk Fe(2)O(3), they may serve as good models for predicting or interpreting novel properties of Fe(2)O(3) nanomaterials.