Vanadium dioxide (VO2) undergoes a fully reversible first-order metal–insulator transition from the M1 monoclinic phase (P21/c) to a high-temperature tetragonal phase (P42/mnm) at around 68 °C. Modulation of the phase transition of VO2 by chemical doping is of fundamental and technological interest. Here, we report the synthesis of highly crystallized Fe-doped VO2 powders by a carbo-thermal reduction process. The impact of Fe doping on the structural and phase transition of VO2 is studied. The as-prepared Fe-doped VO2 samples crystallize in the M2 monoclinic form (C2/m), which is linked to segregation of the doping ions in the V2 zigzag chains. A large increase in the transition temperature to 134 °C is observed, which does correspond to a breakthrough in VO2-type thermochromic materials.