The plate-like iron-rich intermetallic phases in recycled aluminum alloys significantly deteriorate the mechanical properties. In this paper, the effects of mechanical vibration on the microstructure and properties of the Al-7Si-3Fe alloy were systematically investigated. Simultaneously, the modification mechanism of the iron-rich phase was also discussed. The results indicated that the mechanical vibration was effective in refining the α-Al phase and modifying the iron-rich phase during solidification. The forcing convection and a high heat transfer inside the melt to the mold interface caused by mechanical vibration inhibited the quasi-peritectic reaction: L + α-Al₈Fe₂Si → (Al) + β-Al₅FeSi and eutectic reaction: L → (Al) + β-Al₅FeSi + Si. Thus, the plate-like β-Al₅FeSi phases in traditional gravity-casting were replaced by the polygonal bulk-like α-Al₈Fe₂Si. As a result, the ultimate tensile strength and elongation were increased to 220 MPa and 2.6%, respectively.