As with 1980's Ace of Spades, recording commenced with producer Vic Maile at his Jackson's Studio in Rickmansworth in 1981. Motorhead was enjoying their greatest commercial success at the time, having had their live album No Sleep 'til Hammersmith debut at #1 on the U.K. charts. A break in recording for the band to play some November and December dates with Tank was followed by Clarke producing Tank's debut album with help from Will Reid Dick. Soon after, Maille left the Motorhead project, and there are conflicting explanations as to why. One is that Clarke was unhappy with the Maile produced sessions and decided that the album should be recorded themselves, although Lemmy lamented at the time that "it's a shame to have lost Vic in a way because I thought it was successful". However, in the Motorhead documentary The Guts and the Glory, Clarke insists that drummer Phil "Philthy Animal" Taylor refused to work with the producer after Maille got him an unsatisfactory drum sound. Clarke: "And then one day Phil turned to me and said, 'Listen Eddie, why don't you do it?' And I said, 'Man, I don't wanna do it, I'm playing on the record.'...I swear to God, I was reluctant as fuck." In the same film Lemmy states, "I was pissed off 'cause we let Eddie produce it. I wasn't at the time, though. Fair play. But it became obvious after it was released - I sort of sobered up and realized it was garbage, most of it. And there's at least three songs on there that weren't even finished. We just finished them in the studio, you know, like cobbled it together. It just was a substandard album. But the trouble is how do you follow a live album that went straight in at #1? There's nothing you can do." The album was recorded during the best part of late January and February 1982 at Morgan Studios and Ramport Studios in London, with Clarke producing and Dick engineering. Struggling to think of a name for the title track for the album, Lemmy remembered the time the band had performed live under the name Iron Fist and the Hordes from Hell for contractual reasons (a subsequent album What's Words Worth? was released of that event), and decided this was an apt name for this project. The name was eventually shortened to simply Iron Fist. The title track would go on to be one of the band's signature songs.
A promotional film was made of the band dressed in studded leather armour and wielding broadswords, described by Lemmy as "all dressed up as idiots, prancing about in a wood in South Mimms as opposed to prancing about in South Mimms dressed as cowboy idiots", with Clarke adding that they looked "like a bunch of fairies prancing about with armour on... It's very hard not to". The band undertook a UK tour from 17 March to 12 April with support from Tank. This was to be the first tour to drop the bomber lighting rig, with Lemmy feeling that they had "to do something new sooner or later" despite it being "the best show I've ever seen in my life." The rig was replaced by a gigantic iron fist that was suppose to unfold its hand but, as Lemmy explained to Uncut's John Robinson in 2015, it made a "rude gesture" to the crowd. The band continued touring to promote the album, visiting North America in May and June, Japan at the end of June, and after some summer festival appearances, mainland Europe in October and November. The first date of the North American tour, 12 May at C.N.E. Stadium in Toronto, was filmed and subsequently released on video as Live in Toronto and later as the bonus disc of the deluxe edition of the CD. In his 2002 autobiography White Line Fever, Lemmy recalls that at the Toronto show "Eddie was terrible and so was I - I got cramp halfway through the show and couldn't play..." Promotion for the album went as far as the May 1982 edition of Rennbahn Express, an Austrian magazine, which included a free flexidisc with excerpts from "Iron Fist", "Sex and Outrage", "Don't Let 'em Grind You Down" and "Loser". Lemmy is interviewed by Robert Reumann in English and is overdubbed with a German translation. The release of the album prompted Bronze/Mercury in Canada to issue The Complete Motörhead Kit. This featured a limited edition 12" vinyl containing "Iron Fist", "Too Late, Too Late", "Remember Me, I'm Gone", "Ace of Spades" and "Motorhead" (from the No Sleep 'til Hammersmith album), plus a tour programme, tour poster, and an embroidered patch of the band's logo.
After the second date on 14 May at New York's Palladium, Clarke left the band, his replacement being former Thin Lizzy guitarist Brian Robertson with the tour recommencing a week later on 21 May in Detroit. Bad feelings between Kimister and Clarke had been simmering for a while, but the breaking point came when Lemmy decided to record a cover of the Tammy Wynette country classic "Stand By Your Man," with Wendy O' Williams and the Plasmatics. Asked to play on the single, Clarke quit the band. Lemmy reflected on the guitarist's departure in his 2002 memoir:
Actually, Eddie used to leave the band about every two months, but this time it just so happened that we didn't ask him back. We didn't try to persuade him, which is why he stayed away - that surprised him a bit. But we were just tired of him because he was always freaking out and he was drinking a lot back then. He's become much better now since he stopped...Looking back - and I must say, hindsight is 20/20 - it was good for us that we fell apart when we did. We wouldn't have been going now if we had carried on getting more and more famous. We would have wound up a bunch of twats with houses in the country and gotten divorced from each other. So it was just as well, I think, for Motorhead's moral overall. It's important for a band to be hungry because that is the motivation that makes all bands work. And if anyone knows about being hungry for long periods of time, it's me."
Lemmy reiterated in 2000 that Iron Fist was "bad, inferior to anything else we've ever done. Having Eddie produce it was a mistake that even he would now probably admit to". "We weren't ready to do another album, I don't care what anybody says," Clarke maintains in The Guts and the Glory. "It wasn't so much the album, I think it was the attitude the album was made was what made it not good. For me, whenever I play it, I can feel it's not quite right...The songs woulda been better had we been working as a unit."
AllMusic enthuses Iron Fist is "a fine Motörhead album, and there's not much at all to complain about here," but concedes "Clarke's production is a bit sterile" while lauding "several standout songs...amid a strong selection overall." Amazon.com calls the LP "a twelve-fingered mutation of an album with a clutch of gem-studded tracks..."