The structural stability, electronic structure, and optical properties of an iron-adsorbed ZnO (0001) surface with three high-symmetry adsorption sites are investigated with first-principle calculations on the basis of density functional theory and the Hubbard-U method. It is found that the iron adatom in the H-3 adsorption site of ZnO (0001) surface has the lowest adsorption energy of -5.665 eV compared with T-4 and Top sites. For the Top site, compared with the pristine ZnO (0001) surface, the absorption peak located at 1.17 eV has a red shift, and the elevation of the absorption coefficient is more pronounced in the visible-light region, because the Fe-related levels are introduced in the forbidden band and near the Fermi level. The electrostatic potential computation reveals that the work function of the ZnO (0001) surface is significantly decreased from 2.340 to 1.768 eV when iron is adsorbed on the Top site. Furthermore, the degradation mechanism based on the band structure is analyzed. It can be concluded that the adsorption of iron will promote the separation of photoinduced carriers, thus improving the photocatalytic activity of ZnO (0001) surface. Our study benefits research on the photocatalytic activity of ZnO and the utilization rate of solar energy.