Elucidation of a reaction mechanism is the most critical aspect for designing electrodes for high-performance secondary batteries. Herein, we investigate the sodium insertion/extraction into an iron fluoride hydrate (FeF3⋅0.5H2O) electrode for sodium-ion batteries (SIBs). The electrode material is prepared by employing an ionic liquid 1-butyl-3-methylimidazolium-tetrafluoroborate, which serves as a reaction medium and precursor for F− ions. The crystal structure of FeF3⋅0.5H2O is observed as pyrochlore type with large open 3-D tunnels and a unit cell volume of 1129 Å3. The morphology of FeF3⋅0.5H2O is spherical shape with a mesoporous structure. The microstructure analysis reveals primary particle size of around 10 nm. The FeF3⋅0.5H2O cathode exhibits stable discharge capacities of 158, 210, and 284 mA h g−1 in three different potential ranges of 1.5–4.5, 1.2–4.5, and 1.0–4.5 V, respectively at 0.05 C rate. The specific capacities remained stable in over 50 cycles in all three potential ranges, while the rate capability was best in the potential range of 1.5–4.5 V. The electrochemical sodium storage mechanism is studied using X-ray absorption spectroscopy, indicating higher conversion at a more discharged state. Ex-situ Mössbauer spectroscopy strengthens the results for reversible reduction/oxidation of Fe. These results will be favorable to establish high-performance cathode materials with selective voltage window for SIBs.