Non-oxidative methane dehydroaromatization (MDA) provides a promising and efficient technology for the valorization of huge amount of CH4 resources. Fe-based HZSM-5 zeolite as the second most researched catalyst system for MDA, however, commonly showed a much lower activity or/and selectivity for aromatics’ formation, probably due to an unsuitable Fe phase in the zeolite. Different from the reported Fe/HZSM-5 catalysts by the traditional impregnation method with Fe(NO3)3, a Fe/HZSM-5 catalyst was specially designed for the title reaction which was prepared by ion-exchange method with a stable, soluble and divalent Fe salt, i.e., FeSO4. Interestingly, the Fe2+-exchanged HZSM-5 catalyst can show an extremely higher aromatics formation activity with a maximum selectivity of 75–80% at a CH4 conversion of about 15% than any other Fe3+-exchanged and Fe-impregnated HZSM-5 zeolite catalysts at 1073 K. With various characterizations (UV-vis, UV-Raman, CO-DRFIT, HADDF-STEM and, especially, 57Fe Mössbauer spectroscopy), atomically dispersed Fe-oxo species anchored at framework Al sites are recognized to be responsible for selectively activating CH4 into CHx species available for aromatics’ formation. By comparison, the common Fe/HZSM-5 catalysts prepared by impregnation method with Fe(NO3)3 had a large amount of reducible Fe3O4 clusters on zeolite surface, and as they were reduced and carburized, the resulted metallic Fe and Fe carbide were both favorable for CH4 decomposition only, probably due to their poor dispersion. Fortunately, the limited S residuals (about 0.05 wt%) in the Fe2+-exchanged HZSM-5 catalyst from FeSO4 did not show its negative side on strongly promoting C–H cleavage. By comparison, the two impregnated Fe/HZSM-5 catalysts from FeSO4 and Fe2(SO4)3 both showed a complete CH4 decomposition due to considerable SO42- remained. Thanks to the application of the ion-exchange method and FeSO4 as Fe precursor, a highly active and selective Fe-based HZSM-5 catalyst has been successfully modeled and Fe-oxo species are recognized as new active sites for MDA, which may give us a new insight into constructing a catalyst with better catalytic performance for MDA and other reactions.