Herein, we carefully investigated the Fe3+ doping effects on the structure and electron distribution of Cr2O3 nanoparticles using X-ray diffraction analysis (XRD), maximum entropy method (MEM), and density functional theory (DFT) calculations. We showed that increasing the Fe doping induces an enlargement in the axial ratio of c/a, which is associated with an anisotropic expansion of the unit cell. We found that as Fe3+ replaces Cr in the Cr2O3 lattice, it caused a higher interaction between the metal 3d states and the oxygen 2p states, which led to a slight increase in the Cr/Fe–O1 bond length followed by an opposite effect for the Cr/Fe–O2 bonds. Our results also suggest that the excitations characterize a well-localized bandgap region from occupied Cr d to unoccupied Fe d states. The Cr2O3 and Fe-doped Cr2O3 nanoparticles behave as Mott–Hubbard insulators due to their band gap being in the d−d gap, and Cr 3d orbitals dominate the conduction band. These findings suggest that the magnitude and the character of the electronic density near the O atom bonds in Cr2O3 nanoparticles are modulated by the Cr–Cr distances until its stabilization at the induced quasi-equilibrium of the Cr2O3 lattice when the Fe3+ doping values reaches the saturation level range.