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Cold-pressed powder compacts of CrO2 show large negative magnetoresistance (MR) due to intergranular tunneling. Powder compacts made from needle-shaped nanoparticles exhibit MR of about 28% at 5 K. Temperature dependence of the resistivity indicates that the Coulomb blockade intergranular tunneling is responsible for the conductance at low temperature. In this letter we report direct observation and characterization of the microstructure of the intergranular tunnel barriers, using transmission electron microscopy, x-ray diffraction (XRD), and x-ray photoelectron spectroscopy (XPS). A very thin native oxide layer with a thickness of 1–3 nm on the surface of CrO2 powders has been observed. The composition and crystal structure of this surface layer has been determined to be Cr2O3 by XPS and XRD. The dense and uniform Cr2O3 surface layers play an ideal role of tunnel barriers in the CrO2 powder compacts.