Iron tailing is a kind of mineral waste from industrial processing and magnetic separation of iron ore, which severely pollute the air, soil property and the source of water. For large scale tailing ponds (dam height >100 m), the accident could cause a substantial damage. Therefore, it is significant to appropriately utilize the tailings. The present paper systematically studies the possibility of complete replacement of quartz sand with the iron tailings in polymer modified cement mortar used in external wall insulation plaster. The effects of redispersible polymer powers, cellulose ether, water reducing agent, lignin and polypropylene fiber on the performance of polymer modified cement mortar have been discussed. The results show that the performance of polymer-modified cement mortar composed of iron tailings has reached the national standard of external wall insulation system in China.