Purpose Iron deficiency anemia (IDA) is one of the most major micronutrient deficiencies worldwide. Food fortification is one strategy for reducing IDA in the population despite concern regarding the gut pathogenic bacteria overgrowth. The purpose of this study was to evaluate the effect of iron encapsulation in banana peel matrix on iron status and gut microbiota composition in iron deficiency anemia. Design/methodology/approach Anemia was induced in 35 male Sprague Dawley rats of age two weeks by the administration of iron-free diet for two weeks. Rats then randomly divided into control, iron-fortified tempeh (temFe) dose 10 and 20 ppm, iron matrix-fortified tempeh dose 10 and 20 ppm and iron matrix fortified tempeh dose 10 and 20 ppm with probiotic mixture. Blood was drawn at Weeks 2 and 6 for hemoglobin and serum iron analysis. Rats were sacrificed at the end of Week 6, and cecal contents were collected for Lactobacillus, Bifidobacteria and Enterobactericeae analysis. Findings Hemoglobin and serum iron were significantly increased (p < 0.05) in all iron-fortified group with the highest value found in iron matrix dose 20 ppm (10.71 ± 0.15 g/dl and 335.83 ± 2.17 µg/dl, respectively). The cecal Lactobacillus and Bifidobacteria did not differ significantly between groups. Cecal Enterobactericeae was significantly different (p < 0.05) among groups with the lowest level in the temFe-20 (2.65 ± 0.78 log CFU) group. Research limitations/implications The use of commercial inoculum instead of pure Rhizopus oligosporus mold for developing the fortified tempeh may impact the effect of product on cecal gut microbiota composition, as different molds and lactic acid bacteria can grow in tempeh when using commercial inoculum. Social implications In Indonesia, iron fortification is conducted primarily in noodles and flour that limits the impact of iron fortification for reducing IDA in population. Iron fortification in food that was daily consumed by people, that is, tempeh, is potential strategy in reducing IDA in population. Originality/value Tempeh fortification using encapsulated iron improved iron status and gut microbiota composition in iron deficiency anemia.