Methyl modified Fe2O3@SiO2 catalysts with core-shell structure were fabricated through hydrothermal method, Stober method, and following silylation reaction procedure, where the SiO2 shell was employed as a bridge contacting Fe core and hydrophobic groups of CH3 to obtain a highly hydrophobic surface of Fe catalyst. The synthesized catalysts showed high activity and stability toward CO hydrogenation with very low CO2 selectivity (below 5% based on carbon) in a fixed-bed reactor. The catalyst samples were characterized by TEM, SEM, FTIR, TG, XRD, Mossbauer spectroscopy, N-2 adsorption-desorption, H-2-TPR, in situ CO-TPD, XPS, and water contact angle measurements. The results manifest that the hydrophobic surface by methyl modification can prevent the readsoption of water, that inhibits distinctly the water gas shift (WGS) activity and thus suppresses the production of CO2. Furthermore, methyl modified Fe2O3@SiO2 catalyst exhibits higher selectivity of C-2(=) - C-4(=) hydrocarbons than Fe2O3@SiO2 catalyst.