Iron-doped hydroxyapatite (Fe-HAp) is regarded as a promising magnetic material with innate biocompatibility. Despite the many studies reported in the literature, a detailed theoretical description of Fe inclusions is still missing. There is even no consensual view on what kind of Fe defects take place in Fe-HAp—iron interstitial or calcium substitutions? In order to address these questions, we employ modern first-principles methodologies, including hybrid density functional theory, to find the geometry, electronic, magnetic and thermodynamic properties of iron impurities in Fe-HAp. We consider a total of 26 defect configurations, including substitutional (phosphorus and calcium sites) and interstitial defects. Formation energies are estimated considering the boundaries of chemical potentials in stable hydroxyapatite. We show that the most probable defect configurations are: Fe3+ and Fe2+ substitutions of Ca(I) and Ca(II) sites under Ca-poor conditions. Conversely, Fe interstitials near the edge of the hydroxyl channel are favored in Ca-rich material. Substitutional Fe on the P site is also a probable defect, and unlike the other forms of Fe, it adopts a low-spin state. The analysis of Fe K-XANES spectra available in the literature shows that Fe-HAp usually contains iron in different configurations.