We have first observed the nucleation and growth process of carbon nanotubes (CNTs) from iron carbide (Fe3C) nanoparticles in chemical vapor deposition with C2H2 by in situ environmental transmission electron microscopy. Graphitic networks are formed on the fluctuating iron carbide nanoparticles, and subsequently CNTs are expelled from them. Our atomic scale observations suggest that carbon atoms diffuse through the bulk of iron carbide nanoparticles during the growth of CNTs.