Banded iron formations (BIFs) are central to interpretations about the composition of the Precambrian ocean, atmosphere, and biosphere. Hematite is an important component of many BIFs, and its presence has been used as evidence for the former presence of hydrous ferric oxyhydroxides that formed from the oxidation of dissolved ferrous iron in seawater. However, textural evidence for the origin of hematite is equivocal. New petrographic results show that hematite in unmineralized BIF from the ca. 2.5 Ga Dales Gorge Member of the Brockman Iron Formation, Hamersley Group, Western Australia, including morphologies previously interpreted to represent ferric oxyhydroxide precipitates, formed via fluid-mediated replacement of iron-silicates and iron-carbonates along sedimentary layering. The lateral transition from stilpnomelane- and siderite-rich laminae to hematite-dominated laminae is interpreted to reflect progressive stages of in situ alteration of reduced mineral assemblages by oxygen-bearing fluids rather than changes in the chemistry of the water column during deposition. Although morphologies previously ascribed to “primary” hematite are present, they are related to mineral replacement reactions, raising doubts about the petrographic criteria used to identify original hematite. Hematite replacement in unmineralized BIF postdated deposition and possibly metamorphism, and predated modern weathering. From a regional perspective, it appears to be a distal signature of the processes that were responsible for iron-ore mineralization, which involved the deep infiltration of oxygen-bearing meteoric fluids. The mineral replacement reactions recorded in the Dales Gorge Member are unlikely to be unique and probably occurred in BIFs elsewhere at some point in their history. The observation that at least some of the hematite in unmineralized BIF did not form directly from ferric oxyhydroxides implies that hematite is not a reliable proxy for the composition of the precursor sediment or the redox chemistry of the ocean. The oxidation of ferrous-rich phases after deposition suggests that the precursor sediments of BIF originally had a more reduced bulk composition. This raises the possibility that, in an ocean with negligible molecular oxygen and elevated Si and Fe, the growth of iron-rich clay minerals was favored over hematite.