Iron (Fe) oxides promote carbon store stability in conventional (aerated) soils, and yet emerging evidence shows that Fe may also contribute to C decomposition in at redox interfaces. Mineral soil addition is common during peatland cultivation, but high content of Fe in mineral soil may lead to carbon loss upon flooding of agricultural peatlands (e.g. paddies). However, the mechanisms arising in such peatlands are poorly understood. We investigated different forms of Fe, including reactive Fe associated with organic carbon (FeR-OC), in field (natural and agricultural peatlands) and in vitro incubation experiments to in order to elucidate potential pathways of Fe-mediated decomposition. Our results show that FeR and short-range-order Fe (with Fes of particular importance due to its high capacity for carbon sorption) were enriched in agricultural peatlands compared with natural peatlands, while FeR-OC level was similar in both. Although Fes accounted for 60–80% of FeR, ferrous Fe accounted for 85–90% of Fes in agricultural peatlands, suggesting that high ferrous Fe levels counteract the role of Fes in forming Fe-carbon complexes in such flooded conditions. Furthermore, controlled experiments with Fe and phenol oxidase additions demonstrated that Fe reduction could initiate a cascade effect on carbon mineralization by acting as a terminal electron acceptor, releasing dissolved organic carbon from Fe‑carbon complexes, promoting oxidative decomposition and mobilizing dissolved organic carbon in flooded agricultural peatlands. In conclusion, our study demonstrates that increased Fe levels can aggressively accelerate carbon loss in flooded agricultural peatlands through previously underestimated pathways.