We present an investigation on Fe-catalyzed etching of graphite by dewetting Fe thin films on graphite in forming gas. Raman mapping of the etched graphite shows thickness variation in the etched channels and reveals that the edges are predominately terminated in zigzag configuration. X-ray diffraction and photoelectron spectroscopy measurements identify that the catalytic particles are Fe with the presence of iron carbide and iron oxides. The existence of iron carbide indicates that, in additional to carbon hydrogenation, carbon dissolution into Fe is also involved during etching. Furthermore, the catalytic particles can be re-activated upon a second annealing in forming gas.