Nanoscale zero-valent iron (NZVI) can effectively remove and recover Cd(II) from aqueous solutions. However, the oxygen effects on Cd(II) removal by NZVI have been overlooked and not well studied. In this research, the Cd MNN auger lines obtained by X-ray photoelectron spectroscopy (XPS) revealed that Cd(II) adsorbed on the NZVI surface could be reduced to Cd(0) by the Fe(0) core under anaerobic conditions. With coexisting oxygen, the Cd(II) removal efficiency declined significantly, and Cd(II) reduction was inhibited by the thickened surface γ-FeOOH layer. Furthermore, the post-oxygen intrusion corroded the generated Cd(0) and led to the dramatic leaching of Cd(II) ions. According to the density functional theory (DFT) simulation, the adsorbed Cd(II) was preferably coordinated via a monodentate model on the surface of Fe3O4 and γ-FeOOH, which are the dominant surface species of NZVI under anaerobic and aerobic conditions, respectively. Thus, γ-FeOOH with doubly coordinated hydroxyl groups provided fewer adsorption sites than Fe3O4 for Cd(II) ions. Overall, the atmospheric conditions of subsurface remediation and wastewater treatment should be considered when applying NZVI for Cd(II) removal. Favorable atmospheric conditions would improve the efficiency and cost-effectiveness of NZVI-based technologies for the practical remediation of Cd(II) pollution.