In this work, we developed a local heat transfer probe that can measure the heat transfer coefficient to study the effect of the nanofluid with various concentrations and size of nanoparticles on the local heat transfer coefficient in a developed separate effect experimental setup.Water with iron (III) oxide (Fe₂O₃) nanoparticles were used as the nanofluids flowing through the test section. The nanoparticle sizes of the Fe₂O₃ were varying between 20 and 40nm. The concentrations for the different nanoparticle sizes were ranged between 0 and 0.09 % in volume fractions. The results show that use of aqueous Fe₂O₃ nanoparticles can significantly enhance heat transfer coefficient in turbulent flow regime, and the enhancement increases with Reynolds and Nusselt number, as well as particle concentration under the conditions of this work, there is an increase of 73.7% at 0.09% volume concentration. The thermal conductivity was measured and compared with the classical model of Maxwell.