The invention relates to a method for reducing nickel ore by using a reducing rotary kiln and producing ferronickel by rusting an electric furnace, which comprises the following steps: placing red soil ferronickel ore, reducing coal, a desulfurizing agent and additives into the rotary kiln for direct reduction, further performing selection, rusting, and smelting the high-grade ferronickel by the electric furnace, wherein the nickel grade is not less than 20%; and simultaneously recovering ferric oxide red, and using a waste material to manufacture burning-free bricks. The process flow is as follows: preparing raw materials, directly reducing via the rotary kiln, cooling via a cooling kiln, performing the selection, rusting, and smelting by the electric furnace. The particle size of the coal is required to be not more than 15mm, the particle size of lime is less than 2mm, primary air and secondary air are adopted for burning the coal, the calcination time is 2.5-9 hours, the temperature in the kiln is 500-1180 DEG C, the materials are cooled to below 38 DEG C by the cooling kiln, the selection is performed for removing impurities, the rusting is performed for removing the impurities, the smelting is performed by the electric furnace, and then the nickel content in the ferronickel is not less than 20%. The method is simple, the technology is advanced, the energy conservation and the emission reduction are realized, the cost is low, the quality is high, and the degree of mechanization and the degree of automation are high, large-scale production is benefited, large market is achieved, the competitiveness is strong, environment friendliness is achieved, significant economic benefits is obtained, good social benefits and environment-friendly effect are achieved, and further a new way for refining nickel from the red soil ore is .