An optical sensor for sensitive and selective detection of iron(III) has been developed based on redox interaction of Fe(III) ions with starch-coated silver nanoparticles (Ag-NPs) in the presence of 0.001 mol/L HCl. Starch-coated Ag-NPs with an average diameter of 15.4±3.9 nm were successfully synthesized through a simple green method using D-glucose as reducing agent and soluble starch as protecting polymer. The synthesized silver nanoparticles showed a strong localized surface plasmon resonance (LSPR) band around 408 nm and linearly decreasing intensity of LSPR band with increasing concentration of Fe(III) in hydrochloric acid aqueous solution (pH ⁓3). Based on the linear relationship between LSPR intensity and concentration of Fe3+ ions, the as-synthesized starch-coated silver nanoparticles could be used as a smart optical probe for sensitive and selective detection of Fe3+ ions in water with a linear range from 0.7 to 7 mg/L Fe3+ and detection limit of 0.1 mg/L; the relative standard deviation values varied between 2 and 6 % for the whole calibration range. Experiments performed demonstrated that the metal ions Na+, K+, Mg2+, Ca2+, Pb2+, Cu2+, Zn2+ , Cd2+, Hg2+, Co2+, Ni2+, and Fe2+ do not interfere, due to the absence of oxidative activity of these ions, which guarantees the high selectivity of the proposed optical sensor toward Fe3+ ions in aqueous samples. On the basis of experimental results, a detection mechanism of oxidation–reduction reaction between Ag-NPs and Fe3+ ions was proposed. Moreover, the starch-coated Ag-NPs could be applied to the iron speciation in ground and tap waters.