The first study of static polarizability and polarizability anisotropy of small iron clusters up to four atoms calculated ill the framework of density functional theory is presented. The calculations were of all-electron type and performed using a finite field approach implemented in the density functional program ALLCHEM. A newly developed first-order field induced iron basis set for density functional calculations was employed. The calculated polarizability of iron clusters shows that the size dependency of the static polarizability per atom of iron clusters follows the same trend as that observed for sodium and copper clusters. (C) 2004 Elsevier B.V. All rights reserved.