A green and sustainable approach to recycle the waste iron rust into a valuable α modification of Fe2O3 via simple grinding and calcination for application in a hybrid supercapacitor is reported. The α-Fe2O3 was coupled with carbon nanofibers (CNFs) and conducting polymer, polyaniline (PANI), to form composite hybrid supercapacitor electrode materials. The conventional hydrothermal, electrospinning, and in-situ polymerization processes were used to prepare composites. Further, X-ray diffraction (XRD), transmission electron microscopy (TEM), high-resolution transmission electron microscopy (HRTEM), selected area electron diffraction (SAED), scanning electron microscopy (SEM), and energy-dispersive x-ray (EDAX) spectroscopy were used to study the structural, morphological, and compositional properties of the as-synthesized α-Fe2O3 and its composites with CNF and PANI. The α-Fe2O3/CNF and α-Fe2O3/PANI composites, coated on carbon rod, were used as electrodes in a three-electrode system to study electrochemical impedance spectroscopy (EIS), cyclic voltammetry (CV), and galvanostatic charge–discharge (GCD) in 1 M H2SO4. The XRD studies revealed the formulation of iron rust into α-Fe2O3 modifications with an average of 28 nm crystallite size. Uniform dispersion of α-Fe2O3 over CNF of 400–500 nm diameter and excellent covering of PANI over α-Fe2O3 nanomaterials were the morphological features observed for α-Fe2O3 /CNF and α-Fe2O3 /PANI composites, respectively. The electrochemical studies on α-Fe2O3/PANI composites exhibit higher performance as against Fe2O3/CNF with respect to specific capacitance, 192 Fg−1 (88.88 Fg−1); energy density, 11.28 Whkg−1 (3.084 Whkg−1); power density, 162 Wkg−1 (69.39 Wkg−1); and capacitance retention of 80% (75%) after 5000 charge–discharge cycles. The heavy dispersion of α-Fe2O3 over long CNF and PANI fibers with intimate contact resulted in abundant active sites for electrochemical reactions leading to the obtained result. The rust-derived α-Fe2O3 with PANI offers excellent stability to act as a potential candidate for sustainable hybrid supercapacitor application.