Abstract: Hydrogen (H2) reduction of hematite iron ore has been predominantly studied in the solid state. In this study, direct reduced iron (DRI) grade hematite reduction at 1500 °C, 1550 °C, and 1590 °C, where in-situ imaging highlights new phenomena in iron ore reduction when mostly in the liquid phase. At 1500 °C and 1550 °C, iron (Fe) nucleates as dendrites within the liquid slag pool anisotropic growth. Although this dendritic morphology is traditionally driven by cooling, in this system, it is driven by chemical supersaturation. However, the solid Fe layer that forms hinders further reduction, limiting the reduction degree to ~70% after 20 min. At 1590 °C, Fe instead precipitates as spherical droplets, marking a transition to fully liquid-state reduction. Convection, driven by temperature-induced surface tension gradients, facilitates Fe droplet migration toward cooler crucible regions, producing efficient slag-metal separation. While known in metallurgical processes, this is the first observation of such occurrence during H2-driven iron ore reduction. Complementary DFT-based molecular dynamics reveal a drastic increase in the diffusivity of oxygen ions in liquid FeO at 1500 °C compared to solid-state conditions at 1300 °C, consistent with the enhanced kinetics in the liquid state. Consequently, at 1590 °C, a high reduction degree of ~90%, metallization degree of ~86%, and microstructural uniformity are achieved. Collectively, these findings demonstrate that liquid-phase reduction is crucial for efficient mass transport of oxygen and reduced iron, and to yield high reduction rates and metallization, advancing alternative routes to steel production.