The Born-von Karman model is used to calculate phonon density of states (DOS) of nanocrystalline bcc Fe. It is found that there is an anisotropic stiffening in the interatomic force constants and hence there is shrinking in the nearest-neighbour distances in the nanophase. This leads to additional vibrational modes above the bulk phonons near the bottom of the phonon band. It is found that the high energy phonon modes of nanophase Fe are the surface modes. The calculated phonon DOS closely agree with the experimental data except a peak at 37 meV. The calculated phonon dispersion relations are also compared with those of the bulk phonons and anomalous behaviour is discussed in detail. The specific heat in nanophase enhances as compared to bulk phase at low temperatures and the calculated Debye temperature Θ_D agrees with the experimental results. It is predicted that the nanocrystalline Fe may consist of about 14 GPa pressure