Soil organic matter decomposition is limited at waterlogged conditions by the low activity of extracellular enzymes like phenol oxidases. In this paper, we show that ferrous iron (Fe2+), which is abundant in waterlogged soils, significantly stimulates phenol oxidase activity both in pure enzyme assays and in waterlogged soil slurries from nutrient-poor dune slacks. However, the effects in soil slurries were less strong than in enzyme assays. Both the addition of Fe2+ and the initial presence of Fe2+ stimulated phenol oxidase activity at the microaerophilic conditions tested. This stimulation is attributed to the catalysis of additional OH radical production, promoting the oxidation of phenolics. Subsequently, the presence of Fe2+ strongly increased total decomposition rates of soil organic matter, measured as CO2 production and Cotton strip Tensile Strength Loss. There is circumstantial evidence that this stimulation by Fe2+ could be important for decomposition in wetlands at field conditions, but its relevance compared to the effects of other compounds still needs to be elucidated. These results emphasise the crucial role of water quality in determining extracellular enzyme activity and decomposition in waterlogged wetlands.