Abstract: Nanhong agate from Lianhe Village, was found in 2009，which occupies jewelry market quickly by its unique properties, such as high output, nice colour. In this paper, 8 pieces of agate samples from Lianhe Village were selected to be studied. Test means contain gemmological tests, polarzing microscope observation of section, EPMA, CL and laser Raman spectroscopy. Results indicate that the chemical compositions of Nanhong agate from Lianhe Village are SiO₂and FeO_T. Raman spectra of red inclusions and aphanitic red area show peaks at 224, 290, 410, 464, 1 318 cm^-1, which means FeO_Tis attributed to hematite.Under CL it shows red light because of hematite.It can be concluded that the colour of Nanhong agate from Lianhe Village is induced by colour-causing mineral. Cinnabar is not the colour-causing mineral, but hematite. The hematite contained in the samples has two kinds of existence forms. One is suspended in quartz and the hue of colour shading depends on the intensity and sizes of hematite.The other existence form is aphanitic hematite in quartz. The phenomenon of hematite with different sizes is a very important characteristics to distinguish Nanhong agate of Lianhe Village from the other mining areas. In addition, the paper shows the formation of Nanhong agate and the hematite inclusion were of multi-phrase.