The therapeutic effect of Fe2O3 nanoparticles combined with magnetic fluid hyperthermia (MFH) on human hepatocarcinoma SMMC-7721 cells in vitro and xenograft liver cancer in nude mice is studied. We examined growth and apoptosis of SMMC-7721 cells treated with MFH containing Fe2O3 nanoparticles at various concentrations (2, 4, 6, and 8 g/liter) for 30-60 min by using MTT, flow cytometry (FCM), and transmission electron microscopy (TEM). We also observed weight and volume inhibitory rates of the tumors of SMMC-7721-bearing nude mice by using animal experiments. The results showed that Fe2O3 nanoparticles combined with MFH could significantly inhibit the proliferation and increase the ratio of apoptosis of SMMC-7721 cells, and the effect was dose-dependent. The inhibitory rate was 26.5%, 33.53%, 54.4%, and 81.2%, respectively, and the apoptosis rate was 30.26%, 38.65%, 50.28%, and 69.33%, respectively. Animal experiments showed that tumors became small. The weight inhibitory ratio was 42.10%, 66.34%, 78.5%, and 91.46%, and the volume inhibitory ratio was 58.77%, 80.44%, 93.40%, and 98.30%, respectively. Compared with the control and experimental groups, each group had statistically significant difference (p < 0.05). So, Fe2O3 nanoparticles combined with MFH could inhibit the proliferation and induce apoptosis of SMMC-7721 cells and also has a significant inhibitory effect on the weight and volume of xenograft liver cancer. However, the mechanism remains to be further investigated.