Thick dielectric SiO2 shells on the surface of iron particles enhance the thermal and electrodynamic parameters of the iron. A technique to deposit thick, 500-nm, SiO2 shell to the surface of carbonyl iron (CI) particles was developed. The method consists of repeated deposition of SiO2 particles with air drying between iterations. This method allows to obtain thick dielectric shells up to 475 nm on individual CI particles. The paper shows that a thick SiO2 protective layer reduces the permittivity of the ‘Fe-SiO2—paraffin’ composite in accordance with the Maxwell Garnett medium theory. The protective shell increases the thermal stability of iron, when heated in air, by shifting the transition temperature to the higher oxide. The particle size, the thickness of the SiO2 shells, and the elemental analysis of the samples were studied using a scanning electron microscope. A coaxial waveguide and the Nicholson–Ross technique were used to measure microwave permeability and permittivity of the samples. A vibrating-sample magnetometer (VSM) was used to measure the magnetostatic data. A synchronous thermal analysis was applied to measure the thermal stability of the coated iron particles. The developed samples can be applied for electromagnetic compatibility problems, as well as the active material for various types of sensors.