A process for direct reduction of iron oxide in a shaft furnace. The process includes feeding iron oxide to the furnace, passing the iron oxide successively downwardly through a pre-reduction zone, a transition zone, a metallization zone, and a cooling zone while passing rich fuel gas produced by external partial combustion with a sub-stoichiometric volume of air upwardly through the pre-reduction zone in counter-current flow so as to partially reduce the iron oxide, and passing reducing gas downwardly through the metallization zone in co-current flow so as to substantially complete the reduction of the iron oxide to metallic iron. The reducing gas is first pre-heated in a gas heater and then subjected to partial combustion with oxygen to further increase its temperature. The process includes removing a metallized iron product from the cooling zone.