In this work, the combustion behavior of pulverized sponge iron (PSI), a practical-grade iron product that was proposed as a potential candidate in the metal fuel cycle, was observed directly using high-magnification shadowgraphy and other optical diagnostics techniques. The PSI was combusted in a laboratory-scale, McKenna flat-flame burner. Results suggest that, in agreement with theoretical models, PSI combusted heterogeneously, with most of the particle mass converting to an intact, solid oxide. However, in contrast with previous hypotheses, the formation of a microflame of combusting aerosol that was attached to the particle surface was observed. Results from quantitative shadowgraphy indicated near-instantaneous melting and complex behavior—we attempted to explain these based on the Fe–O phase diagram. The analysis of micron- and nano-sized combustion products confirmed that the PSI combusted heterogeneously and a gaseous sub-oxide was formed. Combustion under high excess oxygen was hypothesized to reduce the formation of these oxides.