Methane activation under moderate conditions and with good selectivity for value-added chemicals still remains a huge challenge. Here, we present a highly selective catalyst for the transformation of methane to methanol composed of highly dispersed iron species on titanium dioxide. The catalyst operates under moderate light irradiation (close to one Sun) and at ambient conditions. The optimized sample shows a 15% conversion rate for methane with an alcohol selectivity of over 97% (methanol selectivity over 90%) and a yield of 18 moles of alcohol per mole of iron active site in just 3 hours. X-ray photoelectron spectroscopy measurements with and without xenon lamp irradiation, light-intensity-modulated spectroscopies, photoelectrochemical measurements, X-ray absorption near-edge structure and extended X-ray absorption fine structure spectra, as well as isotopic analysis confirm the function of the major iron-containing species—namely, FeOOH and Fe2O3, which enhance charge transfer and separation, decrease the overpotential of the reduction reaction and improve selectivity towards methanol over carbon dioxide production.