We present an experimental and theoretical study of the geometric structure of ultrathin BaTiO₃ films grown on Fe(001). Surface x-ray diffraction reveals that the films are terminated by a BaO layer, while the TiO₂ layer is next to the top Fe layer. Cations in termination layers have incomplete oxygen shells inducing strong vertical relaxations. Onset of polarization is observed at a minimum thickness of two unit cells. Our findings are supported by first-principles calculations providing a quantitative insight into the multiferroic properties on the atomic scale.