An effective method for the development of magnetic materials with high microwave permeability on the basis of carbonyl iron powders has been proposed. This method consists in the modification of particle morphology from the spherical shape into flaky one with subsequent silica coating of the flakes by sol-gel method. Composites with submicron flaky iron powders (thickness < 1 μm) exhibit remarkable improvement in the microwave magnetic spectra compared to the spherical powder based composites. Even a thin silica overlayer provides a sufficient insulation of the metal particle and decreases the permittivity values.