We present a simple and reproducible method to obtain TiO2 and Fe2O3 mixed-oxide thin films by reactive radio-frequency sputtering. The influence of iron concentration on the structural properties of the layers has been studied. Structural characterization, carried out by electron microscopy analysis, allowed one to correlate the inhibition of the grain growth of titania to the presence of iron oxide and to its segregation at grain boundaries. This behavior should be ascribed to a superficial-tension phenomenon. As a possible application of these thin films, we have investigated the gas-sensing properties toward CO, with particular focus on the role of Fe. The layers were capable to sense CO down to the level requested for environmental monitoring.