Reduction of oxides during sintering is a prerequisite for the manufacturing of powder metallurgy steels. Inadequate control of the sintering atmosphere may impede sinter neck formation and cause entrapment and growth of oxides in sinter necks, ultimately deteriorating the mechanical properties of sintered components. In this study, the oxide reduction and oxygen removal in water-atomized iron powder was investigated by means of thermogravimetric analysis in pure hydrogen. Two principal mass loss events were recorded, corresponding to the removal of the surface oxide layer at around 400 °C and reduction of internal and stable oxides in the range 600–1350 °C. The apparent activation energies of these mass loss processes were determined by means of kinetic analyses, giving values around 100 kJ mol−1 and 200–400 kJ mol−1, respectively. The validity of the results was asserted using hematite reference samples which displayed good correlation with the reduction of the surface oxide layer, thereby showing that the powder surfaces are covered by an Fe2O3 oxide. The high-temperature mass loss, with no analogy in the reference samples, is believed to originate from a combination of oxygen removal from internal oxides and stable oxide particulates on the surface. Analysis of the oxide reduction in iron powder compacts show a slightly lower activation energy for the oxide layer reduction, indicating an influence of the compaction step on the initial state of the powder and oxide layer. At the same time, the high-temperature mass loss event was shifted to higher temperatures, which is believed to be caused by the increasingly restricted mass transport of reduction products along the pores in the sintered compact.