The engineering of the surface morphology and the structure of the thin film is one of the essential technological assets for regulating the physical properties and functionalities of thin film-based devices. This study presents an easy and handy approach to tailor the surface structure of epitaxial thin films utilizing low-energy ion beam. Here, we investigate the evolution of the surface structure and magnetic anisotropy (MA) in epitaxial Fe/MgO (001) model systems subjected to multiple cycles of ion beam erosion (IBE) after thin film growth. The growth of Fe film occurs in the form of three–dimensional islands and exhibits intrinsic biaxial MA. Following a few cycles of IBE, an induced uniaxial magnetic anisotropy leads to a split in the hysteresis loop, and the film displays almost uniaxial magnetic switching behavior. More distinctly, we present a clear and conclusive evidence of (2 × 2) reconstruction of the Fe surface due to the atomic rearrangement by IBE. Furthermore, 57Fe isotope sensitive nuclear resonance scattering measurement provides insight into the depth-resolved magnetic information due to the modified surface topography. We also demonstrate that thermal annealing can reversibly tune the surface reconstruction and induced UMA. The feasibility of the IBE technique by adequately selecting IBE parameters for surface structure modification has been highlighted apart from conventional tailoring of the morphology for the tuning of UMA and introduces a new dimension to our understanding of self-assembled surface morphology evolution by IBE.