The Stranski-Krastanov growth of Fe on W(1 1 0) at 700 K leads to the formation of three-dimensional (3D) Fe islands on a first Fe layer that covers the W substrate pseudomorphically, as confirmed by scanning Auger microscopy (SAM) and low-energy electron diffraction (LEED). In situ stress measurements reveal the reduction of film stress as a dominant driving force for the coalescence of Fe into islands. An in-plane reorientation of the easy axis of magnetization from < -1 1 0 > for layer-by-layer grown films at 300 K to < 0 0 1 > in the 3D islands is found by magneto-optical Kerr effect (MOKE) experiments. This in-plane spin reorientation transition is attributed to the crossing of a critical Fe thickness of order 100 Å in the Fe islands.