The aim of the work is to study the effects of oxygen vacancy and surface hydroxyl group density on the photocatalytic activity of Fe3+-doped TiO2, and to investigate how the titanium dioxide doped with different levels of the Fe3+ influenced their physical and chemical characterizations. The photocatalysts were characterized by X-ray diffraction (XRD), thermogravimetric analysis (TGA), electron spin resonance (ESR), X-ray photoelectron spectroscope (XPS) and Fourier transform infrared (FTIR) spectra. The results revealed that adsorbed hydroxyl group density significantly influenced the photocatalytic activity, and a small amount of Fe3+ can act as a photo-generated hole and a photo-generated electron trap and inhibit the electron–hole recombination. The 0.10%-Fe3+-TiO2 with the highest surface hydroxyl group density revealed the maximum rate constant of 0.716 and the optimal photocatalytic degradation of MB. As Fe3+ doping levels are larger than 0.10%, the cluster of FeTi′–V¨O–FeTi′ generated gradually. This implied that an excessive amount of Fe3+ doped into TiO2 is detrimental to the photocatalytic activity due to the formation of FeTi′–V¨O–FeTi′ clusters and enhances the recombination of photogenerated electrons and holes.