A series of novel Fex-SAPO-34 catalysts with various Fe loadings were synthesized by a one-pot hydrothermal method using triethylamine (TEA) and polyethylene glycol (PEG2000) as co-templates for selective catalytic reduction of NO with propylene (C3H6-SCR) under diesel exhaust conditions. The obtained samples were characterized by XRD, N2 adsorption/desorption, SEM, EPR, UV–vis, H2-TPR, NH3-TPD and in situ DRIFTS technologies. The Fe0.05-SAPO-34 catalyst exhibited attractive SCR activity with excellent hydrothermal durability, which could reach a nearly 100% NO conversion and 100% N2 selectivity at 250–350 °C in 5% H2O and 10% O2. The high catalytic activities of the Fex-SAPO-34 catalysts with the assistance of PEG2000 were attributed to the large specific surface area, strong acidity and high distribution of isolated Fe3+ ions. In situ DRIFTS showed that the isolated Fe3+ ions and Brönsted acid sites might facilitate the formation of adsorbed NO2 species and the oligomerization of carbenium ions (CnH2n+1+), respectively. Furthermore, the presence of H2O could promote the hydrolysis of –NCO species into NH3, thus enhancing the catalytic performance at low temperatures. Finally, a possible reaction path of C3H6-SCR over Fe-SAPO-34 was proposed.