Effects of physical and chemical states of iron-based catalysts on the formation of carbon-encapsulated iron nanoparticles (CEINs) synthesized thermally from kraft lignin were investigated. Experimental results indicated that if solution-based iron nitrate (FeN) was used as an iron source for the catalyst, CEINs observed were ?-Fe and ?-Fe-based cores encapsulated by few layers graphitic-carbon (mostly 1-5 layers) and the majority of these CEINs were embedded in amorphous carbon matrix. The formation of graphitic-carbon shells is believed based on the dissolution and precipitation mechanism of amorphous carbon acting as the carbon source. If solid-based iron nanoparticles (FePs) were used as the catalyst, CEINs observed were ?-Fe, ?-Fe, and Fe3C-based cores encapsulated with tangled graphitic-carbon nanoribbons and carbon tubules and the majority of these CEINs were found along the edge of amorphous carbon matrix. The growth of tangled graphitic-carbon nanoribbons and carbon tubules is based on a chemical vapor decomposition process, i.e., the carbonaceous gases from kraft lignin decomposition served as the carbon source.