Fe-based materials used to adsorb P are commonly considered to be limited by the increased Fe lability, while Fe in drinking water treatment residue (DWTR) shows stable P adsorption abilities. Accordingly, this study aimed to gain insight into Fe lability in DWTR as compared to FeCl3 and Fe2(SO4)3 using Fe fractionation, EXAFS, and high-throughput sequencing technologies. The results showed that compared to Fe2(SO4)3 and FeCl3, Fe was relatively stable in the DWTR under the effects of organic matter, sulfides, and anaerobic conditions. Typically, the addition of FeCl3 and Fe2(SO4)3 enhanced Fe mobility in sediment and overlying water, promoting the formation of Fe-humin acid and ferrous sulfides (FeS and FeS2). However, the addition of DWTR, even at relatively high doses of Fe, has limited impact on Fe mobility. The addition remarkably increased oxidizable Fe in sediment (by approximately 63%), causing Fe to be dominated by oxidizable and residual fractions (like those in raw DWTR); EXAFS analysis also suggested that Fe-humin acid increased substantially with the addition of DWTR, becoming the main Fe species in sediment (with a relative abundance of 50.1%). Importantly, the Fe distributions were stable in sediment with DWTR added, which demonstrated that organic matter stabilized the Fe in the DWTR. Further analysis indicated that all materials promoted the enrichment of bacterial genera potentially related to Fe metabolism (e.g., Bacteroides, Dok59, and Methanosarcina). Fe2O3 in the FeCl3 and Fe2(SO4)3 groups and Fe-HA in the DWTR group were the key species affecting the microbial communities. Overall, the stabilizing effect of organic matter on Fe in DWTR could be used to develop Fe-based materials to enhance Fe stability for environmental remediation.