The topotactic reduction of the oxychloride Sr3Fe2O5Cl2 with LiH results in the formation of Sr3Fe2O4Cl2. Neutron powder diffraction data show that Sr3Fe2O4Cl2 adopts a body-centered tetragonal crystal structure (14/mmm, a = 4.008(1) angstrom, c = 22.653(1) angstrom at 388 K) with anion vacancies located within the SrO layer of the phase. This leads to a structure consisting of infinite sheets of corner-sharing Fe(II)04 square planes. Variable-temperature neutron diffraction data show that Sr3Fe2O4Cl2 adopts G-type antiferromagnetic order below T-N similar to 378(10) K with an ordered moment of 2.81(9) mu(B) per iron center at 5 K consistent with the presence of high-spin Fe(II). The observed structural and chemical selectivity of the reduction reaction is discussed. The contrast between the structure of Sr3Fe2O4Cl2 and the isoelectronic all-oxide analogue (Sr3Fe2O5) suggests that by careful selection of substrate phases, the topotactic reduction of complex transition metal oxychlorides can lead to the preparation of novel anion-deficient phases with unique transition metal oxygen sublattices which cannot be prepared via the reduction of all-oxide substrates.