Iron is required to produce haem and iron-sulphur (Fe-S) clusters, processes thought to occur independently. Here we show that the hypochromic anaemia in shiraz (sir) zebrafish mutants is caused by deficiency of glutaredoxin 5 (grx5), a gene required in yeast for Fe-S cluster assembly. We found that grx5 was expressed in erythroid cells of zebrafish and mice. Zebrafish grx5 rescued the assembly of grx5 yeast Fe-S, showing that the biochemical function of grx5 is evolutionarily conserved. In contrast to yeast, vertebrates use iron regulatory protein 1 (IRP1) to sense intracellular iron and regulate mRNA stability or the translation of iron metabolism genes. We found that loss of Fe-S cluster assembly in sir animals activated IRP1 and blocked haem biosynthesis catalysed by aminolaevulinate synthase 2 (ALAS2). Overexpression of ALAS2 RNA without the 5' iron response element that binds IRP1 rescued sir embryos, whereas overexpression of ALAS2 including the iron response element did not. Further, antisense knockdown of IRP1 restored sir embryo haemoglobin synthesis. These findings uncover a connection between haem biosynthesis and Fe-S clusters, indicating that haemoglobin production in the differentiating red cell is regulated through Fe-S cluster assembly.