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Background: Iron food fortification and oral iron formulations are frequently limited by poor absorption, resulting in the widespread use of high-dose oral iron, which is poorly tolerated. Methods: We evaluated novel iron-denatured whey protein (Iron-WP) microspheres on reactive oxygen species (ROS) and viability in gut epithelial (HT29) cells. We compared iron absorption from Iron-WP versus equimolar-dose (25 mg elemental iron) ferrous sulphate (FeSO4) in a prospective, randomised, cross-over study in fasting volunteers (n = 21 per group) dependent on relative iron depletion (a ferritin level ≤/>30 ng/mL). Results: Iron-WP caused less ROS generation and better HT29 cell viability than equimolar FeSO4. Iron-WP also showed better absorption with a maximal 149 ± 39% increase in serum iron compared to 65 ± 14% for FeSO4 (p = 0.01). The response to both treatments was dependent on relative iron depletion, and multi-variable analysis showed that better absorption with Iron-WP was independent of baseline serum iron, ferritin, transferrin saturation, and haemoglobin in the overall group and in the sub-cohort with relative iron depletion at baseline (p < 0.01). Conclusions: Novel Iron-WP microspheres may protect gut epithelial cells and improve the absorption of iron versus FeSO4. Further evaluation of this approach to food fortification and supplementation with iron is warranted.