Iron ion (Fe3+) is crucial for both biological organisms and the environment, and iron dyshomeostasis can lead to a variety of diseases and environmental issues. Therefore, the detection of Fe3+ is of significant importance across various fields. For this purpose, through the co-assembly of water-soluble tetralactam macrocycle H and 1,1,2,2-tetraphenylethylene (TPE), we prepared a new type of tetralactam macrocycle based aggregation-induced emission dots (AIE-dots), namely TPE@H. TPE@H exhibitted good water-solubility and allowed the water-insoluble TPE to aggregate and exhibit strong fluorescence emission in water. Furthermore, the fluorescence of TPE@H could be quenched by Fe3+ through the inner filter effect, making TPE@H a potential “turn-off” fluorescent probe for Fe3+ detection. TPE@H exhibited a limit of detection as low as 1 μM with high selectivity, and also retained good detection performance in domestic water, human serum, and even drugs, indicating its great potential for biological and environmental monitoring of Fe3+. This study not only provides a green and efficient method for detecting Fe3+, but also expands the approach for application of water-insoluble dyes in the aqueous environment.