We investigate the effect of particle size on reduction temperatures in surfactant capped fine iron oxide (Fe3O4) nanoparticles in size ranging from 7 to 3 nm using in situ high temperature X-ray diffraction (HTXRD). The 7 nm size particles are reduced to metallic α-Fe and FeO phase at 400°C and remains stable up to 600°C. On further heating, α-Fe phase grows at the expense of FeO and the growth process completes at 800°C. Above 900°C, α-Fe is converted to γ-Fe phase and at 1000°C, a part of γ-Fe phase is converted to α-Fe2O3. As the size is decreased from 7 to 3 nm, the onset of reduction to metallic Fe and FeO is enhanced by 100 to 200°C, due to the increased surface spin disorder. Irrespective of the initial particle size, the final phase obtained after annealing at 1000°C and cooled back to room temperature was a mixed phase of α-Fe and α-Fe2O3. Thermo Gravimetric Analysis coupled Mass Spectra (TGA-MS) confirm that the evolved carbon from the oleic acid assist the removal of oxygen atom from Fe3O4 lattice, facilitating the reduction of Fe3O4 into α-Fe and FeO. The magnetization data of the final products before and after vacuum annealing are consistent with final phases observed in the XRD.