In order to identify the influences imposed by Fe substitution, density functional theory-based Car-Parrinello molecular dynamics simulations were employed to study both oxidized and reduced Febearing smectites. The following basic properties were investigated: local structures in the clay layer, hydroxyl orientations, and the vibration dynamics of H and Si. Structural analyses indicated that the average Fe-O bond lengths are ~2.08 Å and 2.02 Å in the reduced and oxidized models, respectively, and the Fe substitutions did not affect the coordination structures of the Al-O and Si-O polyhedra. For hydroxyl orientations, Fe(III) substitution had no obvious influence but Fe(II) forces the coordinated hydroxyls to present a wide-angle distribution. Furthermore, the present work has shown that both substitutions can red-shift the hydroxyl in-plane bending mode. The analyses also revealed that Fe(III) substitution has no effect on the Si-O stretching, while Fe reduction causes a blue-shift of the out-of-plane stretching mode. The results provide quantitative constraints and clues for future research.