The 1.88 Ga Gunflint Formation in Ontario, Canada, has played a key role in the development of current models for the deposition of iron formations. The presence of hematite-rich iron formation intercalated with chert stromatolites containing purported cyanobacterial microfossils sparked the idea that biology was the principal driver of Fe2+ oxidation and iron deposition. However, despite the abundance of hematite in the Gunflint Formation, a primary depositional origin has not been established. Here we present evidence for the replacement of Fe-silicate granules by hematite in drill core intersecting the Gunflint Formation. Iron-oxide replacement proceeded inwards from granule boundaries and along intergranular fractures, producing iron oxide–rich rims around Fe-silicate cores. The abundance of organic matter in shaly iron formation implies that the iron-rich mudstones experienced anoxic diagenesis and that coexisting hematite was not depositional but formed after burial. Widespread distribution of the alteration textures indicates that this was a large-scale process and that much of the hematite is not primary. Lifting the veil of oxidative overprinting reveals an iron-rich sediment that was originally more reduced and dominated by Fe(II)-rich minerals. Our results imply that a major assumption underpinning the original model for biological iron oxidation as the driver of iron formation deposition may be flawed, raising broader questions about the origin of hematite in other iron formations and the role of biology in iron deposition in the early oceans.