Nepheline is a nominally anhydrous aluminosilicate that typically contains an impurity of ferric iron replacing aluminum in tetrahedral sites. However, previous researchers noted the constant presence of ferrous iron in the chemical composition of nepheline from the rocks of the Khibiny and Lovozero massifs (Kola Peninsula, Russia). We have carried out microprobe, spectroscopic, chemical and crystal chemical studies of nepheline from the Lovozero massif. We have established the presence of molecular water in nepheline, and also that the incorporation of ferrous iron into nepheline crystal structure is associated with the simultaneous increasing of the coordination number from four to five (or six) due to the inclusion of the ‘additional’ water molecules that form point [FeO4(H2O)n]-defects (where n = 1, 2) in the tetrahedral framework. The nepheline iron content is closely related to the presence of small needle-like aegirine inclusions. The total iron content in nepheline saturated with aegirine needles is approximately an order of magnitude lower than in nepheline free from aegirine inclusions. Most likely the aegirine inclusions in nepheline are formed as a result of the decomposition of the nepheline–“iron nepheline” solid solution. We propose that this process is triggered by the oxidation of ferrous iron in the crystal structure of nepheline.