Sudden blockage of arteries supplying the heart muscle contributes to millions of heart attacks (myocardial infarction, MI) around the world. Although re-opening these arteries (reperfusion) saves MI patients from immediate death, approximately 50% of these patients go on to develop chronic heart failure (CHF) and die within a 5-year period; however, why some patients accelerate towards CHF while others do not remains unclear. Here we show, using large animal models of reperfused MI, that intramyocardial hemorrhage - the most damaging form of reperfusion injury (evident in nearly 40% of reperfused ST-elevation MI patients) - drives delayed infarct healing and is centrally responsible for continuous fatty degeneration of the infarcted myocardium contributing to adverse remodeling of the heart. Specifically, we show that the fatty degeneration of the hemorrhagic MI zone stems from iron-induced macrophage activation, lipid peroxidation, foam cell formation, ceroid production, foam cell apoptosis and iron recycling. We also demonstrate that timely reduction of iron within the hemorrhagic MI zone reduces fatty infiltration and directs the heart towards favorable remodeling. Collectively, our findings elucidate why some, but not all, MIs are destined to CHF and help define a potential therapeutic strategy to mitigate post-MI CHF independent of MI size.