Iron occurs in clay minerals in both ferric and ferrous forms. Depending on its oxidation state and the environmental conditions, it can participate in redox reactions and influence the sorption processes at surfaces of clay minerals. Knowing the oxidation state and the preferential structural position of Fe2+ and Fe3+ is essential for the detailed understanding of the mechanism and kinetics of such processes. In this study, molecular dynamics (MD) calculations based on density functional theory (DFT+U) were applied to simulate the incorporated Fe in bulk montmorillonite and to explain the measured Fe K-edge X-ray absorption fine structure (XAFS) spectra. The analysis of the experimental data and simulation results suggested that iron in montmorillonite is preferentially incorporated as Fe3+ into the octahedral layer. The simulations showed that there is no preferential occupation of cis- or trans-sites by Fe2+ and Fe3+ in bulk montmorillonite. A very good agreement between the ab initio simulated and the measured XAFS spectra demonstrate the robustness of the employed simulation approach.