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Dissolved iron (Fe) species are a pre-requisite for the most active catalyst sites for the oxygen evolution reaction in alkaline electrolytes, but the overall effects of dissolved Fe on energy- efficient advanced alkaline water electrolysis cells remain unclear. Here, we systematically control the concentration of Fe in a model zero-gap alkaline water electrolyzer to understand the interactions between Fe and high surface area catalyst coatings. Cells employing a platinum-group- metal-containing cathode and a high surface area, mixed-metal-oxide anode yielded an optimum voltage efficiency at elevated temperatures and in the presence of 6 ppm Fe, which reduced the cell voltage by ~100 mV compared to rigorously Fe-free electrolytes. Increasing concentrations of Fe led to a systematic increase in anode activity towards the oxygen evolution reaction and a reduction in the electrochemically active surface area at both the anode and cathode. Metallic Fe was not observed to electrodeposit at cathodes which operate at overpotentials ≤ 120 mV, but dissolved Fe does reduce the apparent number density of sites available for hydride adsorption. These findings suggest that the energy efficiency of advanced alkaline water electrolysis systems can be improved by managing the Fe concentration in recirculating KOH electrolytes.