Fortescue revealed the progress on Wednesday, announcing its Green Metals Project at Christmas Creek had produced molten metal on site using a blended feedstock.
Energy experts welcomed the development but warned mining firms had yet to prove Western Australian iron ore could produce low-emission metals at a commercial scale.
The company's announcement comes after a study warned Australia could risk losing its $120 billion iron ore export market without action to produce green steel, and after the federal government launched a $1 billion investment fund to support early projects.
Fortescue's $US50 million Christmas Creek project launched in 2024 with a target to produce 1500 tonnes of green iron annually.
Industry-wide challenges to hydrogen production slowed its progress, but Fortescue Metals chief executive Dino Otranto said producing molten metal represented a major advance.
"This is a significant milestone for our green metal project and another step towards producing commercial scale green metal in Australia," he said.
"For decades, Australia has exported iron ore to the world – the next opportunity is to create more value from that ore by producing green metal here at home."
Green iron can be made using hydrogen to strip oxygen from ore, before an electric smelting furnace melts and refines it into a product that can be turned into green steel.
Iron ore mined in Western Australia is not as pure as others used to produce green iron, however, and Mr Otranto said the green metals project would continue in stages to overcome production barriers.
"Nobody has solved green metal production using Pilbara ore at commercial scale yet," he said.
"That's the challenge we're taking on."
Climate Energy Finance research head Matt Pollard said the development would advance green iron research in Australia and could also accelerate work on rival projects.
"That is a big step forward because that electric smelting furnace technology is the focus of the NeoSmelt project in Kwinana and it's what a number of other companies around the world are focusing on as well," he told AAP.
"It's worth acknowledging and applauding because that's the technology that's needed to decarbonise all of the Pilbara ore."
The successful trial did not address all parts of the green iron process, including making direct reduced iron, Mr Pollard said, which would need to be addressed.
A Clean Energy Finance report recently warned Australia's iron ore imports could be worth less in future without efforts to decarbonise them, while a study by The Superpower Institute found Australia could generate $386 billion a year by 2060 if it replaced iron ore with green iron.
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