In order to analyze the formation mechanism of iron oxide nanoparticles, we measured the heat flow of $Fe(OL)_3$ precursor with temperature, and TEM images and AC susceptibility of aliquots samples sequentially taken from the reaction solution, respectively. The thermal decomposition of two OL-chain from $Fe(OL)_3$ produced the Fe-OL monomer, which were contributed to the formation of iron oxide nanoparticles. In the initial stage of nanoparticles formation, the small iron oxide nanoparticles had ${gamma}-Fe_2O_3$ structure. However, as the iron oxide nanoparticles were rapidly growth, the iron oxide nanoparticles showed ${gamma}-Fe_2O_3$-FeO core-shell structure which the FeO layer was formed on the surface of ${gamma}-Fe_2O_3$ nanoparticles by insufficient oxygen supply from the reaction solution. These nanoparticles were transformed to $Fe_3O_4$ structure by oxidation during long aging time at high temperature. Finally, the $Fe_3O_4$ nanoparticles with high saturation magnetization and stable in the air could be easily synthesized by the thermal decomposition method.