Purpose – The purpose of the present study is to use an amino-functional polysiloxane for the surface modification of red iron oxide (Fe₂O₃) pigment particles for their improved dispersion stability and hydrophobicity and to study the chemical interactions of polysiloxanes with the particle surface. Design/methodology/approach – Surface-treated red Fe₂O₃ pigment particles were prepared by treatment of the particles with different quantities of the (aminopropylmethylsiloxane)-dimethylsiloxane copolymer in concentrated suspensions in water. The samples were analysed with different instrumental and spectroscopic techniques to study the interaction of the polysiloxane with the particle surface and the effect of the surface treatment of the particles on their dispersion stability and hydrophobicity. Findings – Chemisorption of the amino-polysiloxane onto the surface of Fe₂O₃ particles resulted in stable layers which turned out to be helpful in improving greatly the dispersion stability of the particles as shown by the Static Light Scattering and Dynamic Light Scattering results. Formation of a polysiloxane coating onto the surface of the pigment particles was confirmed by studying the interactions of the polymer molecules with Fe₂O₃ surfaces by Fourier transform infrared spectroscopy and X-ray photoelectron spectroscopy techniques. Practical implications – The surface-treated red Fe₂O₃ particles with improved dispersion stability can be important components of various formulations in applications such as the colouring of the cement or inorganic pigment-based paint formulations. Originality/value – The study provides mechanistic insights about the interactions of amino-polysiloxane with the red Fe₂O₃ particles. The process of surface modification of red Fe₂O₃ particles with the amino-functional polysiloxane showed increased hydrophobicity and dispersion stability which is an important requirement of the pigment-based formulations in real applications.