The one-electron reduction of lipid hydroperoxides by low-valent iron species is believed to be a driver of cellular lipid peroxidation and associated ferroptotic cell death. We investigated reactions of cholesterol 7α-OOH, the primary cholesterol autoxidation product, with Fe2+ to find that 7-ketocholesterol (7-KC, an oxidation product) is the major product under these (reducing) conditions. Mechanistic studies reveal the intervention of a 1,2-H-atom shift upon formation of the 7-alkoxyl radical to yield a ketyl radical that can be oxidized by either Fe3+ or O2 to give 7-KC, the most abundant oxysterol in vivo. We also investigated the corresponding reduction of the isomeric cholesterol 5α-OOH and again found that an oxidation product (5-hydroxycholesten-3-one) predominates under reducing conditions. An intramolecular H-atom shift (this time 1,4-) in the initially formed 5-alkoxyl radical is suggested to yield a ketyl radical that is oxidized to give the observed product. It would appear that a 1,2-H shift also accounts for the predominance of ketones over alcohols when unsaturated fatty acid hydroperoxides are exposed to iron-based reductants, which had previously been reported with hematin and demonstrated here with Fe2+. The predominance of 7-KC over the corresponding alcohol is maintained when cholesterol 7α-OOH embedded in phospholipid liposomes is treated with Fe2+ or when ferroptosis is induced in mouse embryonic fibroblasts. Our observation that 7-KC accumulates in ferroptotic cells suggests that it may be a good biomarker for ferroptosis.