Internal phosphorus loading has become a major problem in many shallow freshwater lakes over the past decades due to the build-up of phosphorus stocks in the sediment. Iron is a natural capping agent which can enhance sediment P binding capacity, thus reducing P availability and shifting a lake from an algal to a macrophyte dominated state. Iron could, however, also impose toxic effects on the biota. We therefore provide a synopsis of iron toxicity studies and lake restoration measures using iron addition. Iron toxicity studies revealed that, even though iron is an essential nutrient for growth, when added in excess, it can negatively affect aquatic organisms. We found 13 studies testing the effect of iron addition as a restoration measure in the field (10) or using sediment from lakes and reservoirs in the laboratory (3). Twelve of the studies reported increased P retention after iron addition, which depended on the iron salts used and the concentrations added in two studies, whereas one study found no effect on P retention. Eight out of the nine field studies that reported biotic responses found reduced chlorophyll concentrations in the water column, whereas toxic effects of iron on organisms remained absent. Iron addition was most successful when external P loading, and concentrations of organic matter and sulphate were low as well as densities of sediment disturbing fish and crayfish. We conclude that iron addition can be a successful restoration method when these conditions are met.