Fe-doped TiO2 nanopowders with controlled molar-atomic ratios of iron to titanium oxide (in percentage) ranging from nominal 1 to 10% were synthesized by a new simple sol–gel method. Metallic Ag nanoparticles were successfully deposited on the nanopowder of the Fe-doped TiO2 surface by citrate reduction of AgNO3 in water/CH3CN mixture. The molar ratio of iron to TiO2, phase formation, bandgaps, crystallinity, catalytic and plasmonic properties of the resultant composites were systematically investigated using UV-visible spectroscopy, SEM, TEM, XRD, XPS, EDX, and photoluminescence spectral analyses. The photocatalytic activity of Ag@Fe-doped TiO2 composite nanoclusters was evaluated through photocatalytic killing of cancer cells. For the photocatalytic killing of cancer cells under visible light irradiation, as-prepared Ag@Fe-doped TiO2 nanopowders exhibited higher activity than Fe-doped TiO2. The promoting effect of the Ag nanoparticles deposited on the Fe-doped TiO2 surface showed strong absorption in the visible region due to localized surface plasmon resonance of Ag and inhibited the recombination of photoelectrons and holes rather than only Fe-doped TiO2. The cytotoxic cell killing efficiency depends on the molar ratio of Fe content to TiO2. The optimum Fe content in Fe-doped TiO2 was determined to be 5% due to the Fe/TiO2 molar ratio. Based on the obtained results, a plausible mechanism was also proposed.