The local structures and optical absorption characteristics of Fe doped TiO2 nanoparticles synthesized by the sol-gel method were characterized by X-ray diffraction (XRD), X-ray absorption fine structure spectroscopy (XAFS) and ultraviolet-visible absorption spectroscopy (UV-Vis). XRD patterns show that all Fe-doped TiO2 samples have the characteristic anatase structure. Accurate Fe and Ti K-edge EXAFS analysis further reveal that all Fe atoms replace Ti atoms in the anatase lattice. The analysis of UV-Vis data shows a red shift to the visible range. According to the above results, we claim that substitutional Fe atoms lead to the formation of structural defects and new intermediate energy levels appear, narrowing the band gap and extending the optical absorption edge towards the visible region.