Blast furnace dust waste (BFDW) proved efficient as a photocatalyst for the decolorization of methylene blue (MB) dye in water. Structural analysis unequivocally identified α-Fe2O3 as the predominant phase, constituting approximately 92%, with a porous surface showcasing unique 10–30 nm agglomerated nanoparticles. Chemical and thermal analyses indicated surface-bound water and carbonate molecules, with the main phase’s thermal stability up to 900 °C. Electrical conductivity analysis revealed charge transfer resistance values of 616.4 Ω and electrode resistance of 47.8 Ω. The Mott-Schottky analysis identified α-Fe2O3 as an n-type semiconductor with a flat band potential of 0.181 V vs. Ag/AgCl and a donor density of 1.45 × 1015 cm−3. The 2.2 eV optical bandgap and luminescence stem from α-Fe2O3 and weak ferromagnetism arises from structural defects and surface effects. With a 74% photocatalytic efficiency, stable through three photodegradation cycles, BFDW outperforms comparable waste materials in MB degradation mediated by visible light. The elemental trapping experiment exposed hydroxyl radicals (OH•) and superoxide anions (O2−•) as the primary species in the photodegradation process. Consequently, iron oxide-based BFDW emerges as an environmentally friendly alternative for wastewater treatment, underscoring the pivotal role of its unique physical properties in the photocatalytic process.