Mill scale which is a valuable secondary raw material produced from the rolling of steel sheets in steel making process, can be agglomerated by using the pelletizing technique for the production of iron oxide pellets. The physicochemical properties of iron oxide pellets produced from mill scale were found to be improved with calcium hydroxide addition. The amount of calcium hydroxide added is varied from 0.5–4%, where the green, dry and indurated mill scale pellets properties were studied and the results of the experiments can be summarised as follows: 1. As the amount of calcium hydroxide added increased the productivity, average drop number (the resistance of pellets to be broken or cracked when dropped from 30 cm hight) and compressive strength of green mill scale pellets increased. 2. The compressive strength and average drop number of dried pellets increased with the increase of both the amount of calcium hydroxide and the drying temperature. 3. The maximum value of compressive strength of indurated pellets was attained at 4% of calcium hydroxide addition followed by induration at 1300°C. 4. The reducibility of the indurated pellets was highest with 0.5% calcium hydroxide and decreased with increasing the amount of calcium hydroxide. While on increasing the firing temperature from 1000 to 1300°C for pellets containing 4% of calcium hydroxide, the reducibility decreased. 5. The compressive strength of reduced mill scale pellets increased with increasing both the amount of calcium hydroxide and firing temperatures for pellets containing 4% of calcium hydroxide. 6. The reduction process of mill scale pellets containing 4% of calcium hydroxide was controlled by combined mechanism for both the initial and final stages of reduction.