The highly efficient transamidation of several primary, secondary, and tertiary amides with aliphatic and aromatic amines (primary and secondary) is described. The reaction is performed in the presence of a 5 mol % concentration of different hydrated salts of Fe(III), and the results show that the presence of water is crucial. The methodology was also applied to urea and phthalimide to demonstrate its versatility and wide substrate scope. An example of its use is an intramolecular application in the synthesis of 2,3-dihydro-5H-benzo[b]-1,4-thiazepin-4-one, which is the bicyclic core of diltiazem and structurally related drugs (Budriesi, R.; Cosimelli, B.; Ioan, P.; Carosati, E.; Ugenti, M. P.; Spisani, R. Curr. Med. Chem. 2007, 14, 279–287). A plausible mechanism that explains the role of water is proposed on the basis of experimental observations and previous mechanistic suggestions for transamidation reactions catalyzed by transition metals such as copper and aluminum. This methodology represents a significant improvement over other existing methods; it can be performed in air and with wet or technical grade solvents.