The geometry of oxygen atoms in hollow sites of Fe nanoislands (∅ ≈ 1-2 nm) on Fe(001) is modified by mesoscopic misfit-induced relaxations of the island atoms. Surface x-ray diffraction, scanning tunneling microscopy, and ab initio calculations indicate a 0.3 Å increased adsorption height [0.7 Å versus 0.4 in O/Fe(001)-p(1x1)] of O atoms going in parallel with a reduced Fe-Fe layer spacing inducing a reduction of the surface magnetic moment (2.85 μB versus 3.2μB ). Our results demonstrate the importance of the mesoscopic misfit for surface physical properties in general.