The development of efficient catalysts for Fischer-Tropsch (FT) synthesis, a core reaction in the utilization of non-petroleum carbon resources to supply energy and chemicals, has attracted much recent attention. ε-Iron carbide (ε-FeC) was proposed as the most active iron phase for FT synthesis, but this phase is generally unstable under realistic FT reaction conditions (> 523 K). Here, we succeed in stabilizing pure-phase ε-FeC nanocrystals by confining them into graphene layers and obtain an iron-time yield of 1258 μmol gs under realistic FT synthesis conditions, one order of magnitude higher than that of the conventional carbon-supported Fe catalyst. The ε-FeC@graphene catalyst is stable at least for 400 h under high-temperature conditions. Density functional theory (DFT) calculations reveal the feasible formation of ε-FeC by carburization of α-Fe precursor through interfacial interactions of ε-FeC@graphene. This work provides a promising strategy to design highly active and stable Fe-based FT catalysts.