Abstract Background Differentiating absolute iron deficiency from functional iron restriction is challenging in active Inflammatory Bowel Disease (IBD). Hepcidin, the systemic iron regulator, could be the key in the diagnosis and management of absolute iron deficiency. In this study, we assessed hepcidin as a diagnostic iron deficiency marker and we explored the relationship between hepcidin, inflammation, hypoxia, and iron deficiency in patients receiving induction therapy with infliximab (IFX) or vedolizumab (VEDO). Methods 130 patients with IBD, who received induction therapy with IFX or VEDO for active disease, were included in this study. Clinical and biochemical data were extracted from medical records. Serum samples at baseline and week 6 of induction therapy were retrieved from the University Medical Center Groningen (UMCG) biobank and analysed for: hepcidin, inflammation (e.g., interleukins [IL] 6, 10, and Tumour Necrosis Factor-α [TNFα]), oxidative stress (free thiols), and hypoxia (e.g., erythropoietin [EPO], Macrophage Inflammatory Protein-3α [MIP3α]). For comparison, serum samples from 50 age- and gender-matched healthy controls were obtained from pre-donation biobank at the UMCG. Response to therapy was defined by either General Physician’s Assessment at week 14 of induction therapy, normalisation or at least a three-point decrease in clinical scores: Harvey-Bradshaw Index (HBI) for Crohn’s Disease, Simple Clinical Colitis Activity Index (SCCAI) for ulcerative colitis. Results Hepcidin correlated with ferritin and sTfR/log ferritin index [ρ = 0.74 and ρ = -0.79, respectively; P<0.001 for both markers], while inflammation- and hypoxia-associated markers showed only marginal correlations. Hepcidin accurately identified absolute iron deficiency: AUC(hepcidin) = 0.89 [95% CI: 0.82–0.95; P<0.001]. Induction with either IFX or VEDO decreased hepcidin [13.5 ng/mL vs. 9.5 ng/mL; P<0.001], ferritin [45.5 ug/L vs. 37.0 ug/L, P<0.05], and inflammatory markers at week 6, while transferrin increased [2.4 g/L vs. 2.5 g/L, P<0.001]. In total, 75.4% of patients responded to the induction therapy. Hepcidin and ferritin decreased, while transferrin increased (P<0.001 for all changes) in patients who responded to the therapy. In addition, hypoxia (EPO and MIP3α) and inflammatory markers such as faecal calprotectin, IL-6, IL-22, and TNFα improved significantly. In contrast, none of these improvements were observed in patients who did not respond to the therapy. Conclusion Hepcidin reflects iron deficiency in active IBD, but inflammation masks the severity of the deficiency. Induction therapy with either IFX or VEDO modulates hepcidin and iron indices, especially in patients who respond to the therapy.