Ultrafast charge recombination in hematite (alpha-Fe2O3) severely limits its applications in solar energy conversion and utilization, for instance, in photoelectrochemical water splitting. We report the first time-domain ab initio study of charge relaxation dynamics in alpha-Fe2O3 with and without the oxygen vacancy (O-v) defect, using non-adiabatic molecular dynamics implemented within time-dependent density functional theory. The simulations show that the hole trapping is the rate-limiting step in the electron-hole recombination process for both neutral and ionized O-v systems. The electron trapping is fast, and the trapped electron are relatively long-lived. A similar asymmetry is found for the relaxation of free charge carriers: relaxation of photoholes in the valence band is slower than relaxation of photoelectrons in the conduction band. The slower dynamics of holes offers an advantage to water oxidation at alpha-Fe2O3 photoanodes. Notably, the neutral O-v defect accelerates significantly the charge recombination rate, by about a factor of 30 compared to the ideal lattice, due to the stronger electron-vibrational coupling at the defect. However, the recombination rate in the ionized O-v defect is decreased by a factor of 10 with respect to the neutral defect, likely due to expansion of the local iron shell around the O-v site. The O-v defect ionization in alpha-Fe2O3 photoanodes is important for increasing both electrical conductivity and charge carrier lifetimes. The simulations reproduce well the time scales for the hot carrier cooling, trapping and recombination available from transient spectroscopy experiments, and suggest two alternative mechanisms for the O-v-assisted electron hole recombination. The study provides a detailed atomistic understanding of carrier dynamics in hematite, and rationalizes the experimentally reported activation of alpha-Fe2O3 photoanodes by incorporation of O-v defects.