Sponge iron (s-Fe0) has a large specific surface area, is cheap and easy to obtain, and has a good reduction capacity. Therefore, its efficacy in enhanced wastewater denitrification and phosphorus removal has been extensively examined. Because of the strong magnetic properties and reactivity of s-Fe0, a passivation layer dominated by iron oxides is formed in liquid phase environments, and this layer inhibits the dissolution of Fe0. In this study, s-Fe0 was used as the carrier filler in an SBR reactor to remove the passivation layer on the surface of s-Fe0 by anaerobic means, and the performance of this reactor was investigated for the removal of chemical oxygen demand (COD), nitrogen, and phosphorus from actual domestic wastewater. The anaerobic treatment of the reactor for 4 days effectively removed the passivation layer on the s-Fe0 surface while the carbon source of the system was maintained with normal feed water. The average removal rates of COD, NH4+-N, and TP in the reactor were 85.67%, 99.8%, and 93.98%, respectively, and the efficient removal of phosphorus in the system was stable for 22–26 days. X-ray diffraction and microbial community analysis showed that, in addition to the formation of FePO4, Fe(PO3), and Fe2P4O12 precipitates were generated in the system to remove phosphorus, and that a synergistic effect aided biological phosphorus removal. Additionally, the presence of abundant microorganisms with corrosion functionality (such as Rhodobacter, Brevundimonas, and Thiobacillus) in the activated sludge system, on the s-Fe0 carrier surface, and inside the carrier, played an essential role in the corrosion and removal of the s-Fe0 passivation layer. These results demonstrated that s-Fe0 is a promising material for nitrogen and phosphorus removal, and anaerobic treatment can effectively alleviate the passivation of s-Fe0. Thus, the efficient removal of phosphorus from actual domestic wastewater can be sustainably achieved.