In an attempt to clarify the origin of the limited electrical activity of Fe implanted in InP we report an X-ray absorption spectroscopy investigation. Fe implantation was performed with a recently developed procedure involving dynamical annealing which is able to increase the electrically active Fe concentration by at least a factor of 100 with respect to previous methods. We have found that Fe is always bonded to P atoms and is never present in the metallic or oxide form. The local structural parameters suggest the formation upon annealing of a disordered Fe–P compound, which may be at the origin of the limited electrical activity.