Thermal-chemical pre-treatment has proven to facilitate the solubilization of organics and improvement in biogas generation from the organic fraction of municipal solid waste (OFMSW). However, the production of recalcitrant is inevitable when OFMSW is pretreated at high temperatures and alkali dosage. This study develops a strategy to use Fe3+ to reduce the formation of recalcitrant compounds, i.e., 5-HydroxyMethyl Furfural (5-HMF), furfurals, and humic acids (HA) during thermal-alkali pre-treatment. It was postulated that the formation of the recalcitrant compound during pre-treatment can be reduced by Fe3+ dosing to oxidize intermediates of Maillard reactions. A decrease in 5-HMF (45–49%) and furfurals (54–66%) was observed during Fe3+ (optimum dose: 10 mg/L) mediated thermal-alkali pre-treatment owing to the Lewis acid behavior of FeCl3. The Fe3+ mediated assays show a substantial improvement in VS removal (28%) and biogas yield, i.e., 31% (292 mL/gVSadded) in 150 °C + 3 g/L NaOH, 34% (316 mL/gVSadded) in 175 °C + 3 g/L NaOH, and 36% (205 mL/gVSadded) in 200 °C + 3 g/L NaOH assays, over their respective controls (no Fe3+ dosing). The reducing property of Fe3+ rendered a low ORP (−345 mV) in the system than control, which is beneficial to the anaerobic microbiome. Electrical conductivity (EC) also shows a three-fold increase in Fe3+ mediated assays over control, promoting direct interspecies electron transfer (DIET) amongst microbes involved in the electrical syntrophy. The score plot and loading plots from principal component analysis (PCA) showed that the results obtained by supplementing 10 mg/L Fe3+ at 150, 175, and 200 °C were significantly different. The correlation of the operational parameters was also mutually correlated. This work provides a techno-economically and environmentally feasible option to mitigate the formation of recalcitrant compounds and enhance biogas production in downstream AD by improving the degradability of pretreated substrate.