The influence of Fe impurities with contents of up to 2 at.% in AlCr targets on the properties of arc-evaporated AlCr(Fe)N coatings was investigated. Analyses of the synthesised coatings by electron microscopy and X-ray diffraction reveal no significant changes in the microstructure. The incorporated Fe atoms are homogeneously distributed and substitute Cr and Al atoms in the crystal lattice as suggested by elemental mappings and X-ray photoelectron spectroscopy. No pronounced modification of the mechanical properties is evident. However, thermogravimetric analysis in oxygen containing atmosphere reveals a lower oxidation onset temperature for the coatings with incorporated Fe. A chemical analysis of oxidised coatings by Raman spectroscopy discloses the formation of Cr2O3 at 800 to 900°C if Fe is present in the coating. This lower oxidation onset results in a slightly reduced wear resistance at temperatures up to 700°C. In contrast, the presence of Fe delays the oxidation reaction at temperatures exceeding 1000°C, presumably due to the formation of a dense oxide scale protecting the coating from further oxidation.