The Thermal Emission Spectrometer (TES) instrument on the Mars Global Surveyor (MGS) mission has discovered a remarkable accumulation of crystalline hematite (α-Fe2O3) that covers an area with very sharp boundaries approximately 350 by 350–750 km in size centered near 2°S latitude between 0° and 5°W longitude (Sinus Meridiani). Crystalline hematite is uniquely identified by the presence of fundamental vibrational absorption features centered near 300, 450, and >525 cm−1 and by the absence of silicate fundamentals in the 1000 cm−1 region. Spectral features resulting from atmospheric CO2, dust, and water ice were removed using a radiative transfer model. The spectral properties unique to Sinus Meridiani were emphasized by removing the average spectrum of the surrounding region. The depth and shape of the hematite fundamental bands show that the hematite is crystalline and relatively coarse grained (>5–10 μm). Diameters up to and greater than hundreds of micrometers are permitted within the instrumental noise and natural variability of hematite spectra. Hematite particles <5–10 μm in diameter (as either unpacked or hard-packed powders) fail to match the TES spectra. The spectrally derived areal abundance of hematite varies with particle size from ∼10% (>30 μm diameter) to 40–60% (10 μm diameter). The hematite in Sinus Meridiani is thus distinct from the fine-grained (diameter <5–10 μm), red, crystalline hematite considered, on the basis of visible, near-IR data, to be a minor spectral component in Martian bright regions like Olympus-Amazonis. Sinus Meridiani hematite is closely associated with a smooth, layered, friable surface that is interpreted to be sedimentary in origin. This material may be the uppermost surface in the region, indicating that it might be a late stage sedimentary unit or a layered portion of the heavily cratered plains units. We consider five possible mechanisms for the formation of coarse-grained, crystalline hematite. These processes fall into two classes depending on whether they require a significant amount of near-surface water: the first is chemical precipitation that includes origin by (1) precipitation from standing, oxygenated, Fe-rich water (oxide iron formations), (2) precipitation from Fe-rich hydrothermal fluids, (3) low-temperature dissolution and precipitation through mobile ground water leaching, and (4) formation of surface coatings, and the second is thermal oxidation of magnetite-rich lavas. Weathering and alteration processes, which produce nanophase and red hematite, are not consistent with the coarse, crystalline hematite observed in Sinus Meridiani. We prefer chemical precipitation models and favor precipitation from Fe-rich water on the basis of the probable association with sedimentary materials, large geographic size, distance from a regional heat source, and lack of evidence for extensive groundwater processes elsewhere on Mars. The TES results thus provide mineralogic evidence for probable large-scale water interactions. The Sinus Meridiani region may be an ideal candidate for future landed missions searching for biotic and prebiotic environments, and the physical characteristics of this site satisfy all of the engineering requirements for the missions currently planned.