Diatoms, unicellular phytoplankton that account for ∼40% of marine primary productivity, often dominate coastal and open-ocean upwelling zones. Limitation of growth and productivity by iron at low light is attributed to an elevated cellular Fe requirement for the synthesis of Fe-rich photosynthetic proteins. In the dynamic coastal environment, Fe concentrations and daily surface irradiance levels can vary by two to three orders of magnitude on short spatial and temporal scales. Although genome-wide studies are beginning to provide insight into the molecular mechanisms used by diatoms to rapidly respond to such fluxes, their functional role in mediating the Fe stress response remains uncharacterized. Here, we show, using reverse genetics, that a death-specific protein (DSP; previously named for its apparent association with cell death) in the coastal diatom Thalassiosira pseudonana (TpDSP1) localizes to the plastid and enhances growth during acute Fe limitation at subsaturating light by increasing the photosynthetic efficiency of carbon fixation. Clone lines overexpressing TpDSP1 had a lower quantum requirement for growth, increased levels of photosynthetic and carbon fixation proteins, and increased cyclic electron flow around photosystem I. Cyclic electron flow is an ATP-producing pathway essential in higher plants and chlorophytes with a heretofore unappreciated role in diatoms. However, cells under replete conditions were characterized as having markedly reduced growth and photosynthetic rates at saturating light, thereby constraining the benefits afforded by overexpression. Widespread distribution of DSP-like sequences in environmental metagenomic and metatranscriptomic datasets highlights the presence and relevance of this protein in natural phytoplankton populations in diverse oceanic regimes.