The MnZn ferrite coating formed on the surface of iron-based soft magnetic powders via facile and modified sol–gel process has been fabricated to obtain better magnetic performance due to its higher permeability compared with traditional nonmagnetic insulation coatings. The infl uence of the MnZn ferrite contents on the magnetic performance of the soft magnetic composites (SMCs) has been studied. As the MnZn insulation content increases, the core loss first experiences a decreasing trend that is followed by progressive increase, while the permeability follows an increasing trend and subse-quently degrades. The optimized magnetic performance is achieved with 2.0 wt％MnZn ferrite, which results from the decrement of inter-particle eddy current losses based on loss separation. A uniform and compact coating layer composed of MnZn ferrite and oxides with an average thickness of 0.38 ± 0.08 μm is obtained by utilizing ion beam technology, and the interface between the powders and the coating shows satisfied adhesiveness compared with the sample directly prepared by mechanical mixing. The evolution of the coating layers during the calcination process has been presented based on careful analysis of the composition and microstructure.