Pyrolysis and catalytic steam gasification of brown coal containing iron hydroxyl complexes have been investigated experimentally and with semi-empirical and density functional theory molecular modelling. Pyrolysis yielded mainly CO2, CO, and reduced iron species. Catalytic steam gasification at 900 °C after 15 min, consumed 20 wt.% additional char and a higher than expected yield of H2 due to post-gasification reactions; inorganic and organic oxygen in char increased compared to pyrolysis. Apparent turnover numbers for catalytic gasification were 12–22 mole of carbon per mole of iron. The distribution of iron species in brown coal indicated small iron clusters are likely to form on heating; pyrolysis was thus modelled using molecules of char with [Fe3], [Fe5] and [Fe3O], and the active site for gasification was shown to be [Fe–C]. The mechanism of catalytic gasification involved H2O chemi-adsorbed on [Fe–C], formation of the [Fe ← OH2] coordination bond, with H2 produced via iron hydride complexes. Formation of CO was via oxygen insertion into [Fe–C] to form [Fe–O–C] that decomposed into CO and another [Fe–C] site. Lower activation barriers were obtained for concerted chemistry involving iron-hydrides. Active sites in char were accessible to H2O as pores had developed around iron species; large sized iron species were not catalytically active but caused large pores to form in char.