Montmorillonite (Mt) is the major clay mineral of bentonite, which is the candidate buffer material in the engineered barrier system for geological disposal of high level waste (HLW). The alteration of Mt due to its interaction with carbon steel (overpack) can produce Fe–Mt. In order to understand the basic properties of Fe–Mt, the sorption studies using Eu(III) are reported here. For this, Fe(III)–Mt was prepared by conventional cation exchange method using FeCl3 with Na–Mt. The obtained Fe(III)–Mt was then reduced to Fe(II)–Mt using ascorbic acid. Both the samples were characterized based on their X-ray diffraction, Fourier transform infrared spectra, cation exchange capacity and specific surface area. The batch sorption studies of Eu(III) were conducted for both Fe(III)–Mt and Fe(II)–Mt as a function of pH (3–10), ionic strength (0.001 M–1 M) and Eu(III) concentration (10−8–10−3 M). The distribution coefficient (Kd) was found to be higher for Fe(III)–Mt compared to Fe(II)–Mt and Na–Mt. The sudden increase in sorption in the pH range 4.5–6 and remaining constant beyond it indicates ion exchange mechanism at pH < 4.5, with surface complexation mechanism dominating the sorption at pH > 4.5. This is further corroborated by ionic strength dependent sorption data which shows decrease in sorption capacity of Fe–Mt with increasing ionic strength at low pH, but remaining more or less unchanged at higher pH. Eu(III) adsorption isotherm on Fe–Mt increased linearly with [Eu(III)] reaching saturation at 10−5 M and 10−4 M for Fe(III)–Mt and Fe(II)–Mt, respectively. The amount of iron released from Fe–Mt and Fe(II)/Fetotal during sorption were estimated to understand the effect on Eu(III) sorption behaviour by release of interlayer iron in Fe–Mt.