Ureilite meteorites are abundant, carbon‐rich, primitive achondrites made of coarse‐grained, equilibrated olivine and pyroxene (usually pigeonite). They probably sample the baked, heterogeneous, melt‐depleted mantle of a large, once‐chondritic parent body that was broken up catastrophically while still young and hot. Heterogeneity in the parent body is inferred from a considerable “slope‐1” variation from one meteorite to another in oxygen isotopes (−2.5‰ < Δ17O < −0.2‰), which correlates with both molar FeO/MgO (range 0.03–0.35) and molar FeO/MnO (range 3–57), i.e., Δ17O correlates with the redox state. No consensus has yet emerged on the cause of these correlated trends. One view favors their inheritance via silicates from hot nebular (preaccretion) processes. Another invokes smelting (reduction of FeO by C in the hot parent body). Here, guided mainly by similar trends among equilibrated ordinary and R chondrites, studies of their unequilibrated counterparts, and work on other primitive achondrites, we propose a new model for ureilites in which the parent body accreted nebular ice with high‐∆17O, Mg‐rich silicates with low ∆17O, and varying amounts of metallic iron. Water from the thawing ice then oxidized the metal yielding secondary FeO‐bearing minerals with high ∆17O that, with metamorphism, became incorporated into the ureilite silicates. FeO/MgO, FeO/MnO, and ∆17O correlate because they rose in unison by amounts that varied spatially, depending on the local amount of metal that was oxidized. We suggest that the parent body was so large (radius ≫ 100 km) that smelting was inhibited and that carbon played a passive role in ureilite evolution. Although ureilites are regarded as complicated meteorites, we believe our analysis explains their mass‐independent oxygen isotope trend and related FeO variation through well‐understood processes and enlightens our understanding of the evolution of early planetesimals from cold, wet bodies to hot, dry ones.