Sustainable hydrogen-based direct reduction (HyDR) of iron oxide is an effective approach to reduce carbon emissions in steel production. As the reduction behaviour is closely related to the microstructure evolution, it is important to understand the microscopic reduction mechanisms. Industrial hematite pellets are microstructurally intricate systems with inherent porosity, defects, and impurities. Therefore, in the present study we investigated the HyDR of single crystal hematite (at 700 °C) to elucidate the reduction behaviour and microstructure evolution in a model system. The reduction kinetics of the single crystal (SC) were compared to those of industrial polycrystalline porous pellets using thermogravimetric analysis. Additional SC samples were prepared such that their faces are parallel to the (0001), (101¯0) and (12¯10) crystallographic planes of hematite, and then partially reduced to 16 and 80 % reduction degree. Their microstructure was thoroughly examined by scanning electron microscopy and electron backscatter diffraction (EBSD). Reaction fronts were thus shown to advance into the hematite by a shrinking core model while creating a percolating pore network in the magnetite layer; this was closely followed by wüstite and iron formation, as well as pore coarsening, with the retained oxides proceeding to reduce homogenously throughout the sample abiding by the pore/grain models. Notably, a “cell-like” morphology develops in the magnetite near the hematite/magnetite interface, with finely porous “cell interiors” surrounded by coarsely porous “cell walls”. Furthermore, the hierarchal pore formation, phase transformations, texture, and orientation relationships are considered.