Iron impurities are believed to act as deep acceptors that can compensate for the n-type conductivity in as-grown Ga₂O₃, but several scientific issues, such as the site occupation of the Fe heteroatom and the complexes of Fe-doped β-Ga₂O₃ with native defects, are still lacking. In this paper, based on first-principle density functional theory calculations with the generalized gradient approximation approach, the controversy regarding the preferential Fe incorporation on the Ga site in the β-Ga₂O₃ crystal has been addressed, and our result demonstrates that Fe dopant is energetically favored on the octahedrally coordinated Ga site. The structural stabilities are confirmed by the formation energy calculations, the phonon dispersion relationships, and the strain-dependent analyses. The thermodynamic transition level Fe³⁺/Fe²⁺ is located at 0.52 eV below the conduction band minimum, which is consistent with Ingebrigtsen’s theoretical conclusion, but slightly smaller than some experimental values between 0.78 eV and 1.2 eV. In order to provide direct guidance for material synthesis and property design in Fe-doped β-Ga₂O₃, the defect formation energies, charge transitional levels, and optical properties of the defective complexes with different kinds of native defects are investigated. Our results show that V_Ga and O_i can be easily formed for the Fe-doped β-Ga₂O₃ crystals under O-rich conditions, where the +3 charge state Fe_GaGa_i and −2 charge state Fe_GaO_i are energetically favorable when the Fermi level approaches the valence and conduction band edges, respectively. Optical absorption shows that the complexes of Fe_GaGa_i and Fe_GaV_Ga can significantly enhance the optical absorption in the visible-infrared region, while the energy-loss function in the β-Ga₂O₃ material is almost negligible after the extra introduction of various intrinsic defects.