Peatlands represent the largest natural terrestrial carbon (C) store, however, this C can become destabilized, particularly in response to anthropogenic disturbance or lowering of the water table. Several different paradigms have been proposed to explain the positive or negative relationships of moisture status with C loss rates in peat soils (e.g. ‘enzyme latch’, ‘iron gate’). The relative importance of these regulatory mechanisms and whether they are mutually exclusive, however, remain unknown. To address this, we evaluated the effects of contrasting soil moisture regime and iron concentration on organic matter mineralization in an agriculturally managed lowland fen peat. Our results showed that for the first 50 days of incubation, phenol oxidative activity under saturated conditions (120% water holding capacity; WHC) was lower than that at 65% WHC, but after this period the pattern was reversed. These results suggest that two different mechanisms may control phenol oxidative activity simultaneously, with the dominant controlling factor and final response being dependent on the trade-offs between oxygen and Fe(II) effects. Although Fe(II) addition increased phenol oxidative activity, it suppressed SOC mineralization regardless of the soil moisture content, suggesting that iron can protect soil C from microbial decomposition in lowland peat soils. Our study has implications for understanding the widely divergent biogeochemical functions of soil moisture on peat soils and emphasizes the influence of oxygen and Fe(II) on phenol oxidative activity and SOC mineralization.