This manuscript explores the influence of annealing temperature on the structural, electrical, dielectric and magnetic properties of hematite (α-Fe2O3) nanostructure samples synthesized via hydrothermal route. Synthesized samples were annealed at 200 °C, 500 °C and 800 °C, and characterized using X-ray diffraction (XRD), Fourier-transform infrared spectroscopy (FTIR), field emission scanning electron microscopy (FE-SEM), temperature-dependent resistivity measurements, dielectric analysis, and vibrating sample magnetometer (VSM) techniques. XRD analysis confirmed the successful synthesis of pure phase α-Fe2O3 rhombohedral structure with space group \(\:\text{R}\stackrel{-}{3}\text{c}\) and improvement in crystallinity by increasing annealing temperature, evidenced by sharper- more intense peaks with increase in crystallite size 13.35 nm to 38.80 nm. The FTIR spectra confirmed the formation of a well-defined α-Fe2O3 phase, as evidenced by the presence of characteristic Fe-O vibrational bands at 462.3 cm−1 and 544.2 cm−1. A noticeable shift of these peaks towards lower wavenumbers was observed with increasing annealing temperature, indicating lattice relaxation and improved structural ordering. Additionally, progressive purification of the samples was evident at higher annealing temperatures, particularly at 800 °C, where impurity related bands associated with hydroxyl, nitrate, and carbonate groups were completely diminished. The average value of grain size have been observed via FE-SEM, showed a growth trends corresponding to the annealing temperature, with size ranging from 21.13 nm to 33.35 nm and the formation of uniform, flower-like structures at higher temperatures. The temperature dependent resistivity behavior confirmed the semiconducting nature of the material, with enhanced carrier mobility and reduced grain boundary resistance at higher annealing temperatures. Dielectric analysis demonstrated a temperature and frequency dependent dielectric response, with the highest dielectric constant observed at elevated temperatures especially in the S800 sample, indicating improved crystallinity and reduced defect density due to higher annealing. The dielectric loss (tan δ) increases with temperature at low frequencies due to enhanced space charge polarization and thermally activated carriers, while it remains low and stable at higher frequencies, making these materials suitable for high frequency applications. The parameters such as coercivity (HC), remanence-magnetization (MR), and maximum magnetization (MS) were analysed by VSM measurement and reveals an increase in coercivity (HC) from 495.83 Oe to 2060.81Oe with temperature accompanied by change in other magnetic parameters. Increase in these parameters with annealing is linked to improved crystallinity and reduced surface spin disorder. Magnetic hysteresis analysis of α-Fe2O3 nanostructures reveals a transition from weak ferromagnetism to enhanced magnetic ordering with increasing annealing temperature. All samples exhibited non-saturating M-H loops, indicating single domain behavior. Thermal annealing is effective for tuning the magnetic properties of hematite nanostructures for advanced multifunctional applications such as spintronics, magnetic sensing, and magnetic separation.