Abstract: The synthesis of oxygen vacancies (OVs)-modified TiO₂ under mild conditions is attractive. In this work, OVs were easily introduced in TiO₂ lattice during the hydrothermal doping process of trivalent iron ions. Theoretical calculations based on a novel charge-compensation structure model were employed with experimental methods to reveal the intrinsic photocatalytic mechanism of Fe-doped TiO₂ (Fe–TiO₂). The OVs formation energy in Fe–TiO₂ (1.12 eV) was only 23.6% of that in TiO₂ (4.74 eV), explaining why Fe³⁺ doping could introduce OVs in the TiO₂ lattice. The calculation results also indicated that impurity states introduced by Fe³⁺ and OVs enhanced the light absorption activity of TiO₂. Additionally, charge carrier transport was investigated through the carrier lifetime and relative mass. The carrier lifetime of Fe–TiO₂ (4.00, 4.10, and 3.34 ns for 1at%, 2at%, and 3at% doping contents, respectively) was longer than that of undoped TiO₂ (3.22 ns), indicating that Fe³⁺ and OVs could promote charge carrier separation, which can be attributed to the larger relative effective mass of electrons and holes. Herein, Fe–TiO₂ has higher photocatalytic indoor NO removal activity compared with other photocatalysts because it has strong light absorption activity and high carrier separation efficiency.