The $alpha$-Fe$_2$O$_3$ gas sensor, prepared by the precipitation of Fe(OH)$_3$ from a solution of iron(III) sulfate and tin (IV) chloride, was composed of fine particles and was superior in sensitivity to other $alpha$-Fe$_2$O$_3$. The gas sensitivity was found to depend on the amounts of remaining sulfate ion the microstructure and a small amount of iron(II) species generated through the reduction of $alpha$-Fe$_2$O$_3$. The sensing mechanism of $alpha$-Fe$_2$O$_3$gas sensor was confirmed to be due to the reduction of $alpha$-Fe$_2$O$_3$ to the low resistive Fe$_3$-xO$_4$ by combustible gas and to depend on the crystral structure.