Iron is essential to living cells, acting as a cofactor in a number of important enzymes in metabolism; however in the absence of correct storage iron forms dangerous oxygen radicals. In both yeast and plants, iron is stored in a membrane-bound vacuole through the action of a vacuolar iron transporter (VIT). This transporter is conserved in the apicomplexan family of obligate intracellular parasites, including in Toxoplasma gondii, a pathogen of medical and veterinary importance. Here, we assess the role of VIT, and iron storage, in T. gondii. We show that iron is restricted to a compartment in the parasite that does not overlap with zinc. By deleting VIT we find a slight growth defect in vitro, however the absence of VIT leads to hypersensitivity to iron, confirming its essential role in iron detoxification in the parasite. This hypersensitivity can be rescued by scavenging of oxygen radicals. In the absence of VIT, parasites store less iron and are at a growth disadvantage when moving into an iron-depleted environment. We show parasite VIT expression is regulated by iron levels at both the transcript and protein level, and by altering the distribution of VIT within the cell. In the absence of VIT, we find that T. gondii responds by altering expression of genes with a role in iron metabolism and by increasing the activity of the antioxidant protein catalase. We also show that iron detoxification has an important role both in parasite survival within macrophages and in virulence in a mouse model. Together, by demonstrating a critical role for VIT during iron detoxification in T. gondii, we reveal the importance of iron storage in the parasite and provide the first insight into the machinery involved.