Heavy oil represents the greatest portion of the remaining oil and with the increasing demand for energy sources, the interest and efforts are directed toward producing from reservoirs with such kind of oil. The common method to produce the heavy oil is the thermal recovery method, but recently a new technology applied for enhancing the heavy oil recovery which is using Nano additives due to their ability to alter certain factors in the formation and in oil properties. In this study the catalytic effect of Nano-Fe2O3 in the viscosity of Sudanese heavy oil was studied and the result indicate that the Fe2O3 decreases the viscosity considerably at certain concentration and temperature, for this study 0.25% wt additive gave the maximum reduction in the viscosity. Also, this work investigated experimentally the effect of Nano-Fe2O3 in the oil recovery by steam injection and the result showed that when injecting a mixture of steam and Nano-Fe2O3 there is an increase in the oil recovery factor due to cracking reactions which convert the heavy component to lighter components, in this experiment there was an increase of 8% in the recovery factor.