A single step method was developed for the preparation of graphene oxide/Fe2O3 composites by exfoliation of graphite oxide with an oxygen-rich ferric acetyl acetonate complex. The synthesized materials were characterized by Fourier transform infrared spectroscopy, X-ray diffraction, vibrating sample magnetometry, atomic force microscopy, and low temperature dc conductivity measurements. After exfoliation, the Fourier transform infrared studies reveal the decomposition of epoxy groups and the simultaneous formation of composites of iron oxide particles within the graphene oxide. Atomic force microscopy reveals the formation of an ~5nm thick graphene oxide stack with layered morphology. The layered morphology of graphene oxide degrades at higher concentrations of iron oxide. The vibrating sample magnetometer studies show ferromagnetic behavior of all composites in the range of 0.13-5.5emu/g at room temperature. The conductivity of these composites is found to be governed by a quasi 1D hopping mechanism.