The discovery of a powerful and transient iron line feature in the X-ray afterglow spectra of gamma-ray bursts would be a major breakthrough for understanding the nature of their progenitors. Piro et al. and Yoshida et al. report such a detection in the afterglows of GRB 970508 and GRB 970828, respectively. We discuss how such a strong line could be produced in the various scenarios proposed for the event progenitor. We show that the observed line intensity requires a large iron mass, concentrated in the vicinity of the burst. The previous explosion of a supernova, predicted in the 'supranova' scenario, is the most straightforward way to account for such a large amount of matter. We discuss three different physical processes that could account for the line: recombination, reflection and thermal emission. Among these, reflection and thermal emission may explain the observed line features; reflection should be important if the remnant is optically thick, while thermal lines can be produced only in a thin plasma. The recombination process requires extremely high densities to reprocess the burst photons efficiently, but could work during the X-ray afterglow. Future key observations for discerning the actual radiating process are discussed.