Iron-containing mesoporous molecular sieves (Fe-MCM-41) synthesized by both direct hydrothermal (DHT) and template-ion exchange (TIE) methods have been characterized and used as catalysts for the liquid-phase epoxidation of styrene with diluted H2O2. The characterizations with XRD, diffuse reflectance UV-vis, ESR, and EXAFS suggest that iron cations are highly dispersed and tetrahedrally coordinated with oxygen in the DHT samples with iron content lower than ca. 0.9-1.1 wt% (Si/Fe = 105-86). This coordination environment is similar to that in a ferrisilicate zeolite with MFI structure and contributes to the increase in relative strong acidic sites, as indicated by NH3-TPD studies. On the other hand, the TIE samples mainly contain small iron oxide clusters. The conversion of styrene over the DHT catalyst increases significantly with increasing iron content up to 1.1 wt%. The selectivity to styrene oxide and the efficiency of H2O2 for the epoxidation can be improved by adding H2O2 slowly to keep the H2O2 concentration low during the reaction. As compared with the DHT catalyst, the TIE catalyst shows a much poorer performance for the epoxidation of styrene. It is suggested that the atomically isolated iron sites account for the epoxidation reaction with hydrogen peroxide. The iron cations incorporated inside the framework of MCM-41 do not leach during the reaction, whereas the small iron oxide clusters leach out into the liquid phase and do not contribute to the catalytic reaction.