In this paper, a novel composite photocatalyst, ferric oxide–bismuth oxyhalide (Fe2O3‐BiOCl0.5Br0.5) has been synthesized, characterized, and used for the degradation of methyl orange through advanced oxidation process under ambient conditions (sunlight, pH 7.0, and temperature 25°C). The catalyst has been characterized by using UV‐Vis spectrophotometer, Fourier transform infrared (FTIR) spectroscopy, Raman spectrometer, scanning electron microscopy (SEM), energy dispersive X‐ray analysis (EDX), and X‐ray diffractometer (XRD) techniques. The catalyst shows appreciable activities under natural sunlight conditions. From the XRD patterns and SEM images, it is observed that the elongation along the z axis in the crystal lattice of BiOCl0.5Br0.5 in the catalyst can lead to a lattice distortion induced internal electric field which can help in charge carrier separation and transport. The Fe2O3‐BiOCl0.5Br0.5 catalyst shows more than 90% photodegradation efficiency of methyl orange in 90 min of sunlight exposure. The presence of magnetic ferric oxide in the composite photocatalyst helps to isolate the catalyst from the reaction mixture by using an external magnet, and thus, the Fe2O3‐BiOCl0.5Br0.5 catalyst can be reused repeatedly, towards degradation of organic pollutants.