In the present study, we demonstrate the coexistence of paramagnetic and superparamagnetic Fe(III) in mesoporous MCM-41 matrix. The loading of trivalent iron in MCM-41 not only results in the formation of iron oxide nanoclusters in the mesovoids, but also substitutes (isomorphously) in the silicate matrix. The resulting non-framework and framework Fe(III) exhibit superparamagnetic and paramagnetic properties, respectively. The dual behaviour of Fe(III) in MCM-41 is deduced using various analytical and spectroscopic techniques, viz. X-ray diffraction (XRD), diffuse reflectance ultraviolet-visible (DRUV-VIS), electron paramagnetic resonance (EPR) and Mossbauer spectroscopy.