Experimental and thermodynamic analyses are reported on direct reduction (DR) of Australian lump ore using simulated iron bath offgases. The results indicate that, for any given coal gas mixture comprising CO-CO2-H2-H2O, there exists a zero carbon formation temperature which is influenced mainly by the CO/CO2 ratio in the inlet gas. The influence of ore characteristics, gas mixture, pH(2) (where p is partial pressure), pN(2), and other processing and operating parameters on the rates of reduction and carbon deposition up to 950°C was investigated and discussed. Experimental results agreed very well with thermodynamic predictions. It is concluded that, when the gas mixture is thermodynamically capable of depositing carbon, to avoid soot formation anywhere along the DR shaft requires operating temperatures above the zero carbon formation temperature. Alternatively, the CO/CO2 ratio must be decreased, the gas mixture must be modified, or the formation of metallic iron must be avoided.