Photocatalytic reduction is considered one of the most promising strategies for efficient and friendly nitrate removal. In this work, Fe-doped LiNbO3 (Fe-LNO) was synthesized by hydrothermal method and used as a heterogeneous catalyst for photocatalytic reduction of nitrate. 1% Fe-LNO exhibited an optimal N2 selectivity and stability especially under acidic conditions. Photogenerated electrons played a major role in this photocatalytic reduction system, and CO2− played an auxiliary role. After Fe doping, the Lewis acid sites increased, which was considered an important activity center on the surface of the catalyst. Moreover, the introduced Fe preferentially occupied on lithium positions, and an impurity level formed in the band gap of LiNbO3. Such level functioned as not only a springboard of photogenerated electrons on the valence band (VB) but also a donor energy. The contribution orbits of the bottom of conduction band (CB), the top of VB, and impurity level were identified by DFT calculation.