Interfacial interactions between a layer of iron and MgO hold the key to various phenomena like tunnel magnetoresistance, perpendicular magnetic anisotropy, interlayer exchange coupling, observed in the system. Interface structure has been studied in situ during deposition of iron on MgO surface, using soft x-ray absorption spectroscopy (SXAS). Sub-monolayer sensitivity of SXAS, combined with in situ measurements as a function of iron layer thickness, allowed one to study the evolution of interface with film thickness. Two different substrates namely MgO (0 0 1) single crystal, and a polycrystalline MgO film on Si substrate have been used in order to elucidate the role of the state of MgO surface in controlling the interface structure. It is found that at the interface of iron and MgO film, about two monolayers of Fe3O4 are formed. Fe3O4 being the oxide of iron with the highest heat of formation, the reaction appears to be controlled thermodynamically. On the other hand, on the interface with MgO (0 0 1) surface, FeO is formed, suggesting that the reaction is limited by the availability of oxygen atoms. Magnetic behavior of the FeO layer gets modified significantly due to proximity effect of the bulk ferromagnetic iron layer.