The effects of iron limitation on photoacclimation to dynamic irradiance were studied in Phaeocystis antarctica G. Karst. and Fragilariopsis cylindrus (Grunow) W. Krieg. in terms of growth rate, photosynthetic parameters, pigment composition, and fluorescence characteristics. Under dynamic light conditions mimicking vertical mixing below the euphotic zone, P. antarctica displayed higher growth rates than F. cylindrus both under iron (Fe)–replete and Fe-limiting conditions. Both species showed xanthophyll de-epoxidation that was accompanied by low levels of nonphotochemical quenching (NPQ) during the irradiance maximum of the light cycle. The potential for NPQ at light levels corresponding to full sunlight was substantial in both species and increased under Fe limitation in F. cylindrus. Although the decline in Fv/Fm under Fe limitation was similar in both species, the accompanying decrease in the maximum rate of photosynthesis and growth rate was much stronger in F. cylindrus. Analysis of the electron transport rates through PSII and on to carbon (C) fixation revealed a large potential for photoprotective cyclic electron transport (CET) in F. cylindrus, particularly under Fe limitation. Probably, CET aided the photoprotection in F. cylindrus, but it also reduced photosynthetic efficiency at higher light intensities. P. antarctica, on the other hand, was able to efficiently use electrons flowing through PSII for C fixation at all light levels, particularly under Fe limitation. Thus, Fe limitation enhanced the photophysiological differences between P. antarctica and diatoms, supporting field observations where P. antarctica is found to dominate deeply mixed water columns, whereas diatoms dominate shallower mixed layers.