SiO2 has been extensively studied as a superior insulating layer for innovative Fe-based soft magnetic composites (SMCs). During the preparation process of SMCs, appropriate heat treatment can effectively alleviate internal stress, reduce dislocation density, decrease coercivity, and enhance permeability. Maintaining the uniformity and integrity of SiO2 insulating layers during heat treatment is a challenging task. Hence, it is crucial to explore the heat-treatment process and its effects on the magnetic properties of SMCs and their insulating layers. Herein, Fe–Si/SiO2 particles were prepared using chemical vapor deposition (CVD), and Fe–Si/SiO2 SMCs having a core–shell heterostructure were synthesized through hot-press sintering, and investigations were conducted into how heat-treatment temperature affected the microstructure of SMCs. This study thoroughly investigated the relationship between the evolution of SiO2 insulating layers and the magnetic properties. Additionally, the impact of the heat-treatment time on the magnetic properties of Fe-Si/SiO2 SMCs was evaluated. The results showed that in the temperature range of 823–923 K, the core–shell heterostructures grew more homogeneous and uniform. Concurrently, the stress and defects inside the Fe-Si/SiO2 SMCs were eliminated. When the temperature was raised over 973 K, the core–shell heterostructure was disrupted, and SiO2 began to disperse. After following a heat-treatment process (923 K) lasting up to 60 min, the resulting SMCs had high resistivity (1.04 mΩ·cm), the lowest hysteresis loss (P10 mt/100 kHz of 344.3 kW/m3), high saturation magnetization (191.2 emu/g). This study presents a new technique for producing SMCs using ceramic oxide as insulating layers. This study also includes a comprehensive analysis of the relationship between microstructure, magnetic properties, and heat treatment process parameters. These findings are crucial in expanding the potential applications of ceramic oxide.