Phase manipulation of MoS₂ from thermodynamically stable 2H phase to the unstable but more reactive 1T phase represents a crucial strategy for improving the reactivity in many reactions. The widely adopted wet chemistry approach uses intercalating entities especially alkali metal ions to achieve the phase transition; however, these entities are normally inert for the target reaction. Here, we describe the first use of iron atoms for the intercalation of 2H-MoS₂ layers, driving the partial transition from 2H to 1T phase. Interestingly, in the peroxymonosulfate (PMS)-based Fenton-like reactions, the interlayered confinement of Fe atoms not only activates the inert basal plane, but also adds more reactive Fe sites for the formation of metal-PMS complex as primary reactive species for pollutant removal. In the degradation of a model pollutant carbamazepine (CBZ), the Fe-intercalated MoS₂ exhibits a first order rate constant 13.3 times higher than 2H-MoS₂. This strategy is a new direction for manipulating the phase composition and boosting the catalytic reactivity of MoS₂-based catalysts in various scenarios, including environmental remediation and energy applications.