Iron-rich calcium sulfoaluminate (IR-CSA) cement is a low-carbon cement that contains small amount of aluminum. In this study, IR-CSA cement preparation method using gypsum as the source of calcium oxide was developed. The effects of iron on the decomposition of gypsum, formation of phases, microstructure of the clinker, and hydration of cement paste were investigated. The results indicated that the decomposition of gypsum and the formation of the target phase were first slightly promoted and then hindered when the iron content in the raw material increased. The presence of iron enhanced the growth of crystal grains and densification of the microstructure in the clinker. The early hydration behavior of IR-CSA cement mainly depended on the hydration of the iron-bearing ye’elimite and ferrous phases. Furthermore, the incorporation of iron into mineral phases was studied. The maximum incorporation content of Fe2O3 in ye’elimite and belite phase reached 19.36 wt%, expressed as C4A2.61F0.39S-, and 2.83 wt%, respectively. The chemical composition of the ferrous phase was similar to that of C4AF, and its mineral phases were C2F, C6AF2, C4AF, and C6A2F from the center to the edge. Finally, the feasibility of preparing IR-CSA cement using phosphogypsum as the sole calcium oxide source was evaluated for engineering applications. This unique preparation method reduces the use of aluminum in raw materials and thus promotes recycling of iron-containing or low-aluminum-containing industrial solid waste materials.