A search for new heavy particles manifested as resonances in two-jet final states is presented. The data were produced in 7 TeV proton-proton collisions by the Large Hadron Collider (LHC) and correspond to an integrated luminosity of 315 nb^-1 collected by the ATLAS detector. No resonances were observed. Upper limits were set on the product of cross section and signal acceptance for excited-quark (q*) production as a function of q* mass. These exclude at the 95% CL the q* mass interval 0.30 <mq* <1.26 TeV, extending the reach of previous experiments.