The smectite-to-illite reaction, termed illitization, is a ubiquitous process in siliciclastic sedimentary environments and plays a significant role in biogeochemical cycling, plant nutrition, petroleum maturation/migration, particle dispersion–aggregation, and contaminant uptake. The change in the redox state of structural Fe in smectite as a consequence of microbial Fe respiration, in part, controls the physicochemical properties of smectite, but knowledge of the chemical/structural modification at a nanoscale, particularly the reversibility of the structure and K fixation at various Fe-redox states that could control illitization, is limited. The present study focused on measuring indicators of illitization at a nanoscale, utilizing transmission electron microscopy (TEM) with energy dispersive X-ray spectroscopy (EDS) and terahertz time-domain spectroscopy (THz-TDS), as well as chemical analysis, including cation exchange capacity (CEC) and Fe(III) reduction. Nontronite (NAu-1) of the size fraction less than 0.2 m was inoculated with the Fe-reducing bacteria Shewanella oneidensis MR-1 in M1 medium with structural Fe(III) in NAu-1 as the sole electron acceptor and Na-lactate as the electron donor. Incubation continued for up to 12 months in an anaerobic chamber. Two sets of microbial structural Fe(III) reduction experiments were performed, and then one set was re-oxidized by bubbling pure oxygen gas through an autoclaved needle for 24 hours. The reaction was stopped at various time points by freezing the samples with liquid N2. The extent of Fe(III) reduction reached 26%; 5% of residual Fe(II) was detected upon re-oxidation. TEM and X-ray diffraction (XRD) analyses confirmed the presence of an illite-like packet with collapsed 10-Å basal spacing in the Fe-reduced nontronite sample and permanently fixed K after long-term incubation. The proportion of K fixation in the interlayer increased with the extent of Fe(III) reduction and the amount of residual Fe(II) upon re-oxidation. The values of CEC increased corresponding to the extent of Fe(III) reduction; the CEC was not restored after re-oxidation, most likely due to the increase in residual Fe(II), secondary phase mineral (vivianite) precipitation, and permanent K fixation. Nondestructive THz-TDS depicted the chemical/structural modification of bioreduced nontronite and its reversibility. In the present study, true illite was not formed because of the low value of Al/Si; however, the progressive increase in K/(K + 2Ca) and Al/Si in the packets of 10-Å layers as well as the chemical/structural irreversibility upon re-oxidation with increasing incubation time strongly suggested illitization.