First approach towards in situ synthesis of iron (Fe) nanoparticles within poly(N-isopropylacrylamide-acrylic acid) (p(NIPAM-AA)) microgel is established in this work. Morphology, size, and size distribution of Fe-p(NIPAM-AA) hybrid microgel are confirmed by FTIR, STEM, and UV-Vis spectroscopy. Size of majority of Fe nanoparticles lies in 5–25-nm range, and very few nanoparticles lie in 30–40-nm range. Reduction of series of substrates with similar and dissimilar chemical structure is catalyzed by synthesized Fe-p(NIPAM-AA) hybrid microgel. Catalytic activity of hybrid microgel towards various substrates is studied by comparing their apparent rate constant (kapp), reduction time, and percentage reduction. Catalytic activity of hybrid microgel towards reduction of nitroarenes is observed higher than that of azo dyes. Repulsion among carboxyl groups (COOH) of AA facilitated the flux of substrates inside the microgel network. Significant difference among kapp, reduction time, and percentage reduction of all substrates is observed. kapp of crystal violet is observed maximum among all substrates. Percentage conversion of 4-nitroanisole is observed highest among all substrates. Similar values of kapp, reduction time, and reduction percentage of all nitrophenols are obtained, while significant difference in values of kapp, reduction time, and reduction percentage of all azo dyes is observed. Catalytic reduction of all substrates is compared on the basis of orientation of functional groups, presence of bulky groups, and number of bonds to be reduced.