Iron in the early anoxic oceans of Archean age (4000-2500 million years ago) is believed to have been oxidized to form banded iron formations (BIF). Previously, it has been proposed that iron was oxidized either by free oxygen, H₂O₂, microbial oxidation, or photo-oxidation. However, these mechanisms are difficult to reconcile with evidence for the oceans at that time having been largely devoid of dissolved oxygen and oxidants, together with the rarity of microbial remains in BIF and restrictively slow rates of photo-oxidation. Experiments reported here show that ferrous iron readily oxidizes in analogs of Archean anoxic seawater following the precipitation of ferrous hydroxide. Once precipitated, ferrous hydroxide undergoes decomposition to elemental iron that reacts with water at room temperature to form ferric iron and release hydrogen gas. The ferric iron may then be incorporated into green rust, a mixed ferrous-ferric phase that ages into iron minerals commonly found in BIF. Our finding suggests that anoxic iron oxidation may have contributed to the formation of oxide-facies BIF, especially Algoma-type BIF that likely formed in semi-restricted basins where ferrous hydroxide saturation was more easily achieved. Additionally, ferrous hydroxide decomposition would have contributed to early Earth's oxidation, as a result of hydrogen escape to space, thus providing new insights into environmental and biological conditions on early Earth.