Herein, we demonstrate the synthesis of highly efficient Fe-doped graphitic carbon nitride (g-C3N4) nanosheets via a facile and cost effective method. The synthesized Fe-doped g-C3N4 nanosheets were well characterized by various analytical techniques. The results revealed that the Fe exists mainly in the +3 oxidation state in the Fe-doped g-C3N4 nanosheets. Fe doping of g-C3N4 nanosheets has a great influence on the electronic and optical properties. The diffuse reflectance spectra of Fe-doped g-C3N4 nanosheets exhibit red shift and increased absorption in the visible light range, which is highly beneficial for absorbing the visible light in the solar spectrum. More significantly, the Fe-doped g-C3N4 nanosheets exhibit greatly enhanced photocatalytic activity for the degradation of Rhodamine B under sunlight irradiation. The photocatalytic activity of 2 mol% Fe-doped g-C3N4 nanosheets is almost 7 times higher than that of bulk g-C3N4 and 4.5 times higher than that of pure g-C3N4 nanosheets. A proposed mechanism for the enhanced photocatalytic activity of Fe-doped g-C3N4 nanosheets was investigated by trapping experiments. The synthesized photocatalysts are highly stable even after five successive experimental runs. The enhanced photocatalytic performance of Fe-doped g-C3N4 nanosheets is due to high visible light response, large surface area, high charge separation and charge transfer. Therefore, the Fe-doped g-C3N4 photocatalyst is a promising candidate for energy conversion and environmental remediation.