The structure, physical characteristics and selective photocatalytic oxidation properties of quantum confined nanosize iron doped TiO₂ (Q-TiO₂/Fe³⁺) particles were studied by TG-DSC, XRD, DRS, EPR and Selective Oxidation Photocatalytic Measurements. It is shown that the solubility of iron in the obtained Q-TiO₂/Fe³⁺ nanoparticles is 1.0 atom% and the iron doping level has a great influence on the transformation of anatase to rutile (A-R). The quantum confined effect was observed for Q-TiO₂/Fe³⁺ nanoparticles. All of the samples have EPR Bulk-Fe³⁺ and Surf-Fe³⁺ signals, which are located in the bulk and surface of TiO₂ nanoparticles respectively. Quantitative EPR results indicate that the relative EPR intensity of these paramagnetic centers shows regular change with varying corresponding iron modification level. In situ EPR indicates that the photo-generated charge carrier (h⁺, e⁻) could be trapped by different Fe³⁺ sites simultaneously, i.e., trapping of h⁺ is due to Surf-Fe³⁺ sites at g = 4.30, whereas that of e⁻ is attributed to Bulk-Fe³⁺ sites at g = 1.99. Selective photocatalytic oxidation of cyclohexane into cyclohexanol with higher selectivity has been obtained by molecular oxygen activation over Q-TiO₂/Fe³⁺ nanoparticles under mild conditions. It is thought that the optical surface state of Q-TiO₂/Fe³⁺ nanoparticles play a key role in the selective photocatalytic oxidations.