We have investigated the growth and magnetic properties of 0-3 ML (monolayer) Fe on stepped Pd(110) with reflection high-energy electron diffraction (RHEED), low-energy electron diffraction (LEED) and the surface magneto-optic Kerr effect (SMOKE) in order to relate the morphology, structure and magnetic properties in a low-dimensional system. The Fe films, grown at 340 K, are smooth and pseudomorphic up to 1.5 ML, where three-dimensional growth and lateral lattice relaxation ensues. The in-plane row spacing along the [110] decreases by {approximately}5-6 % at 3 ML. RHEED oscillations with l-ML period are observed in the (1,0), (2,0) and the center of the (0,0) streak intensity. The tail of the (0,0) streak at low exit angle, however, has a 0.5-ML period oscillation, which suggests step decoration growth. Submonolayer Fe films remain ferromagnetic above {approximately}0.3 ML. The magnetic easy axis is initially perpendicular to the surface and is in-plane for Fe thickness >1.5 ML. Between 0.9-1.2 ML, there appear to be mixed magnetic phases as indicated by an increase in coercivity.