Iron oxides are crucial for the long-term storage of soil organic carbon (SOC) in paddy soils, making them a key factor in global carbon cycles and important for strategies aimed at combating climate change. This review examines the role of iron oxides in paddy soils, particularly their interaction with SOC, which helps stabilize carbon and contributes to mitigating climate change. These processes of iron oxide phase transformations, wet–dry cycles, and microbial activity help trap carbon in the soil, supporting climate change mitigation efforts. Wet–dry cycles promote mineral dissolution and re-precipitation, forming new reactive surfaces and OC-Fe complexes. Future research should adopt a multi-scale approach to better connect molecular mechanisms with ecosystem-level carbon processes. A deeper understanding of iron oxide behavior in paddy soils will support the development of sustainable soil management practices and improve models for predicting soil carbon sequestration under climate change.