Microbial fuel cells (MFCs) are innovative devices to extract renewable energy using exoelectrogens from wastewater. The performance of MFCs mainly depends on the electron transfer efficiency between the exoelectrogens and the anode materials. In this work, iron carbide (Fe3C) nanoparticles encapsulated with graphitic carbon layers embedded into biochar (nano-Fe3C@C) were prepared as a binder-free anode material for MFCs. The encapsulated carbon layers can avoid the direct contact between Fe3C nanoparticles and the electrolyte, thereby effectively inhibiting the dissolution and over-aggregation of nanoparticles, and over 96% of the in 10–70 nm. Moreover, this configuration enhanced the interfacial contact between the Fe3C nanoparticles and the biochar matrix, resulting in a significantly lower charge transfer resistance (Rct) of 39.30 Ω compared to carbon cloth (CC) and sugarcane carbon (SC) anodes. This hybrid structure also promoted biocompatibility and extracellular electron transfer (EET) of exoelectrogens with nano-Fe3C anode, to obtain a fast start-up time of 67 h. Modified anode material achieved a maximum load voltage of 0.62 V along with significant enrichment of the Geobacter genus. Consequently, the nano-Fe3C anode exhibited an exceptional power density of 2316 mW m−2 in the acetate-fed MFCs, which was higher than the reported studies involving Fe3C-based non-graphene anode materials. The nano-Fe3C@C material is a promising and sustainable anode for MFCs in wastewater treatment and renewable energy generation. Current findings have opened a new gateway for the preparation of other dispersive, durable, and high-performance metal-based materials for MFCs and bioelectrochemical sensors.