Substitution of Fe₂O₃ with 5, 10 and 20 mole % TiO₂ by flame spray synthesis forms solid solutions of nanoparticles as small as 15 nm with a correspondingly high specific surface area of ~ 95 m²/g, as measured with X-ray diffraction (XRD) and transmission electron microscopy (TEM). Their electronic structure and microstructure leads the solid solution a characteristic, which can be exploited for gas sensing, more so than pure α-Fe₂O₃. With a combination of X-ray photoelectron spectroscopy (XPS) and electrochemical impedance spectroscopy (EIS) the electronic structure was probed and correlated with the charge transfer. XPS reveals that Ti-substitution of Fe₂O₃ nanoparticles favors higher contribution of lattice oxygen over the decrease of a non-stoichiometric oxygen ion species and inhibits the reduction of Fe³⁺ to Fe²⁺ upon the oxidizing processing conditions. The change of the conductivity type as well as activation energy is found to be dependent on the material composition. Ti-substituion of Fe₂O₃ stabilizes the hematite phase and influences the change of conductivity type from p-type to preferable n-type. Conductivity of Ti-subsituted Fe₂O₃ is improved and is considered as a small polaron hopping, supported by the charge compensation by Ti⁴⁺. These nanoparticles work efficiently as a H₂ and NH₃ sensing material, particularly Fe₂O₃ - 5 mole % TiO₂ at 573 K. The sensor response is improved in comparison to pure Fe₂O₃.