The electronic and magnetic properties of the novel spin-ladder iron oxide Sr₃Fe₂O₅, containing an unusual square-planar coordination around high-spin Fe²⁺ cations, were investigated using the generalized gradient approximation plus the Coulomb interaction correlation method. Our results demonstrated that the G-type antiferromagnetic configuration is the ground state, which is in excellent agreement with experimental neutron powder diffraction and Mössbauer spectroscopy measurements, as well as available theoretical results in the literature, albeit with slightly larger computed magnetic moments. Moreover, the outstanding discrepancy between the two-dimensional crystal structure and the three-dimensional electronic/magnetic properties was resolved via the special localization and orientation of electronic/spin charge in real space, i.e., the d_z² orbital ordering of the down-spin Fe 3d electron.