Objective: The present study investigated the risks and benefits of routine Fe–folic acid (IFA) supplementation in pregnant women living in low- and high-groundwater-Fe areas in Bangladesh. Design: A case-controlled prospective longitudinal study design was used to compare the effect of daily Fe (60 mg) and folic acid (400 μg) supplementation for 3·5 months. Setting: A rural community in Bangladesh. Participants: Pregnant women living in low-groundwater-Fe areas (n 260) and high-groundwater-Fe areas (n 262). Results: Mean Hb and serum ferritin concentrations at baseline were significantly higher in pregnant women in the high-groundwater-Fe areas. After supplementation, the mean change in Hb concentration in the women in the low-groundwater-Fe areas (0·10 mg/dl) was higher than that in the pregnant women in the high-groundwater-Fe areas (–0·08 mg/dl; P = 0·052). No significant changes in the prevalence of anaemia or Fe deficiency (ID) in either group were observed after IFA supplementation; however, the prevalence of Fe-deficiency anaemia (IDA) decreased significantly in the women in the low-groundwater-Fe areas. The risk of anaemia, ID and IDA after supplementation did not differ significantly between the groups. None of the participants had Fe overload. However, a significant proportion of the women in the high- and low-groundwater-Fe areas remained anaemic and Fe-deficient after supplementation. Conclusion: IFA supplementation significantly increased the Hb concentration in pregnant women living in the low-groundwater-Fe areas. Routine supplementation with 60 mg Fe and 400 μg folic acid does not pose any significant risk of haemoconcentration or Fe overload. Further research to identify other nutritional and non-nutritional contributors to anaemia is warranted to prevent and treat anaemia.