Carbon-encapsulated iron nanoparticles (Fe@CNPs) with a high degree of graphitization, good integrity in the graphite shells, and high microwave-absorbing capability were prepared by first dissolving ferrocene into organic solvent and then being carbonized by MW-metal discharges under inert atmosphere. Four different organic solvents (benzene, cyclohexane, paraffin, and anhydrous ethanol) were tested, and well-graphitized Fe@CNPs were formed when using benzene or cyclohexane as the solvent. The use of MW-metal discharges with low-toxic cyclohexane and ferrocene as raw materials provides a new method for the preparation of Fe@CNPs with the merits of simplicity, low environmental impact, and high efficiency. The fabricated Fe@CNPs have excellent microwave-absorbing capability, which is respectively 29, 19.3, and 9.7 times those of carbonyl iron powder, SiC, and carbon nanotubes after 1-min microwave irradiation at 1000 W. The thermal gravimetric analysis demonstrates that the fabricated Fe@CNPs have good thermal stability. Owing to these properties, Fe@CNPs have the potential to shape nanoscale or micron scale high-energy sites for a vast variety of applications in the field of microwave chemistry.