This gray-black salt is the product of the reaction of bismuth and iodine, which once was of interest in qualitative inorganic analysis.

[3][4] Bismuth(III) iodide adopts a distinctive crystal structure, with iodide centres occupying a hexagonally closest-packed lattice, and bismuth centres occupying either none or two-thirds of the octahedral holes (alternating by layer), therefore it is said to occupy one third of the total octahedral holes.

[5][6] Bismuth(III) iodide forms upon heating an intimate mixture of iodine and bismuth powder:[7][8] BiI3 can also be made by the reaction of bismuth oxide with aqueous hydroiodic acid:[9] Since bismuth(III) iodide is insoluble in water, an aqueous solution can be tested for the presence of Bi3+ ions by adding a source of iodide such as potassium iodide.

A black precipitate of bismuth(III) iodide indicates a positive test.

Bi(III) is also used in a Barbier type allylation of carbonyl compounds in combination with a reducing agent such as zinc or magnesium.