The N-doped composite shell encapsulated iron nanoparticles (CSEINPs) were prepared by DC arc discharge under nitrogen at 800°C, using the anode with high Fe content and good homogeneity. The morphology, microstructure, composition, and some properties of the N-doped CSEINPs were characterized by various characterization techniques. The results revealed that the shells of the N-doped CSEINPs were composed of homogeneously amorphous structure containing C, Fe, O, and N elements; the saturation magnetization (Ms) and coercivity (Hc) of them at room temperature were 130 emu/g and 194 Oe, respectively. Due to the surface structure and the electrostatic interaction, the N-doped CSEINPs are employed to remove methylene blue (MB) from the waste solution, and they exhibited high adsorption properties and photocatalytic activity under irradiation of visible light (IVL). The kinetics of adsorption of MB on the N-doped CSEINPs was investigated and the recycling test was carried out. The formation mechanism of the N-doped CSEINPs is discussed briefly.