Coastal sediments are important sources of dissolved iron (dFe) that make the coastal ocean iron replete, and contribute an important supply of dFe to the photic regions of the adjacent open ocean. The biogeochemical processes that dictate sedimentary dFe flux are a complex interplay of microbial activities related to reduction-oxidation condition, Fe and S cycling, and sediment bio-mixing and bio-irrigation by benthic fauna. We investigated the effect of bottom water oxygen concentration on iron dynamics in laboratory mesocosms in the presence and absence of the common polychaete Nereis diversicolor. Mesocosms were established using sediment obtained from a local intertidal mudflat, maintained with varying levels of hypoxia (defined as <63 μM dissolved O2), and monitored for changes in iron biogeochemistry. At the end of the experiment, subcores were taken to measure solid phase Fe species and microbial community analysis via 16S rDNA gene sequencing. Bioturbation played an important role in increasing the quantity of poorly crystalline Fe(III)-oxides within the sediments, but decreasing the flux of Fe(II) across the sediment-water interface. These results further demonstrate the importance of bioturbation for sedimentary Fe-cycling and show a complex response to hypoxia involving both animal behavior and microbial response.