Magnetic and magnetocaloric effects of (Mn1−xFex)5Ge3 compounds are studied systematically. The maximum of magnetic entropy changes of 8.01 J/kg K under an external field change of 5 T is obtained for (Mn0.9Fe0.1)5Ge3, which is the largest value in Mn5Ge3-based solid solutions. Moreover, the Fe substitution increases the refrigeration capacity (RC) value greatly. The largest RC value of 237 J/kg in (Mn0.8Fe0.2)5Ge3 even compares favorably to that of many well-known magnetic refrigeration materials. Thus the Fe-containing (Mn1−xFex)5Ge3 compounds are much-improved magnetic refrigerants for the application of room-temperature magnetic refrigeration. The increase of the RC value is probably resulted from the formation of magnetic nanostructure.