Water can be stored in nominally anhydrous minerals as substitutional hydroxyl, generating vast but commonly unrecognized H2O reservoirs in ostensibly dry regimes. Researchers have long known that hematite (α-Fe2O3) can accommodate small concentrations of hydroxyl through the substitution of Fe3+ by 3H+. Our study of natural hematite has demonstrated the occurrence of “hydrohematite” phases that are 10–20 mol% deficient in Fe and accordingly contain 3.6–7.8 mol% structural water. Intergrown with natural hydrohematite samples were superhydrous goethite-like phases exhibiting an Fe deficiency of 10–20 mol% relative to end-member goethite (α-FeOOH). We synthesized hydrohematite in alkaline solutions (pH 9–12) at low temperatures (T < 200 °C) using fresh ferrihydrite as the transient precursor, and we observed a nonclassical crystallization pathway involving vacancy inoculation by Fe as nanocrystals evolved. The high level of incorporation of H2O in iron (hydr)oxides dramatically alters their behaviors as catalysts and pigments, and the presence of hydrohematite in rocks may rule out high-T diagenesis. We propose that hydrohematite is common in low-T occurrences of Fe oxide on Earth, and by extension it may inventory large quantities of water in apparently arid planetary environments, such as the surface of Mars.