Methane is a powerful greenhouse gas and its biological conversion in marine sediments, largely controlled by anaerobic oxidation of methane (AOM), is a crucial part of the global carbon cycle. However, little is known about the role of iron oxides as an oxidant for AOM. Here we provide the first field evidence for iron-dependent AOM in brackish coastal surface sediments and show that methane produced in Bothnian Sea sediments is oxidized in distinct zones of iron- and sulfate-dependent AOM. At our study site, anthropogenic eutrophication over recent decades has led to an upward migration of the sulfate/methane transition zone in the sediment. Abundant iron oxides and high dissolved ferrous iron indicate iron reduction in the methanogenic sediments below the newly established sulfate/methane transition. Laboratory incubation studies of these sediments strongly suggest that the in situ microbial community is capable of linking methane oxidation to iron oxide reduction. Eutrophication of coastal environments may therefore create geochemical conditions favorable for iron-mediated AOM and thus increase the relevance of iron-dependent methane oxidation in the future. Besides its role in mitigating methane emissions, iron-dependent AOM strongly impacts sedimentary iron cycling and related biogeochemical processes through the reduction of large quantities of iron oxides.