Semiconducting iron disilicide (β-FeSi2) island grains of a few hundred nanometers in diameter were formed on the surface of Si powder by metal–organic chemical vapor deposition. On Au-coated Si powder, the Au–Si liquidus phase was obtained by melting the Si surface via the Au–Si eutectic reaction, which contributed to the formation of island grains. The dramatic decrease in the defect density in β-FeSi2, which was due to this growth mechanism, was confirmed by the photoluminescence properties. The β-FeSi2/Si composite powder could evolve hydrogen from formaldehyde aqueous solution under irradiation of visible light with wavelengths of 420–650 nm.