Despite the high potential for oxidative stress stimulated by reduced iron, contemporary iron-depositing hot springs with circum-neutral pH are intensively populated with cyanobacteria. Therefore, studies of the physiology, diversity, and phylogeny of cyanobacteria inhabiting iron-depositing hot springs may provide insights into the contribution of cyanobacteria to iron redox cycling in these environments and new mechanisms of oxidative stress mitigation. In this study the morphology, ultrastructure, physiology, and phylogeny of a novel cyanobacterial taxon, JSC-1, isolated from an iron-depositing hot spring, were determined. The JSC-1 strain has been deposited in ATCC under the name Marsacia ferruginose, accession number BAA-2121. Strain JSC-1 represents a new operational taxonomical unit (OTU) within Leptolyngbya sensu lato. Strain JSC-1 exhibited an unusually high ratio between photosystem (PS) I and PS II, was capable of complementary chromatic adaptation, and is apparently capable of nitrogen fixation. Furthermore, it synthesized a unique set of carotenoids, but only chlorophyll a. Strain JSC-1 not only required high levels of Fe for growth (≥40 μM), but it also accumulated large amounts of extracellular iron in the form of ferrihydrite and intracellular iron in the form of ferric phosphates. Collectively, these observations provide insights into the physiological strategies that might have allowed cyanobacteria to develop and proliferate in Fe-rich, circum-neutral environments.