We present the ab-initio calculations for the lattice distortion effect of substitutional single impurities, I (= Sc ∼ Ge, Sn), and substitutional two impurities, I–I and I–Sn, in bcc-Fe. Sn is a perturbed-angular-correlation (PAC) probe. The calculations are based on the generalized-gradient-approximation in the density-functional formalism and the full-potential Korringa-Kohn-Rostoker (FPKKR) Green’s function method. For single impurities, we show that the available experimental results, such as lattice distortion around the impurities and the atomic volume changes per impurity, are reproduced very well by the present calculations. For two impurities, we clarify the lattice distortion effect on 1st-nearest neighbor (NN) interaction energies of I–I and I–Sn pairs in Fe, being a difference between the distortion energies with two impurities located on the infinitely separated sites and on the neighboring sites. We initially show that the lattice distortion effect is very low for the interaction energies between two impurities with a small size-misfit, compared with the host atom, although it becomes high for the interaction energies of two impurities with a large size-misfit. The lattice distortion effect on the I–I (I = Cr ∼ Zn) interaction energies is less than 0.02 eV, while the lattice distortion effect on the I–Sn (I = Sc, Ge) interaction energies is greater than 0.2 eV. Secondly, we show that we can improve the agreement with the experimental results for the interaction energies of I–Sn pairs in bcc-Fe, by taking into account the lattice distortion. Finally, we show that the magnetic interaction is important for the lattice distortion of the I–Sn (I = Cr, Mn) pairs. The high lattice distortion for I–Sn pairs (I = Cr, Mn) is partly caused by the antiferromagnetic interaction of impurities I with the 1st-NN host atom on the opposite site of the Sn impurity, resulting in the high energy gain (0.13 eV, 0.06 eV) of I–Sn interaction.