Abstract: A method and apparatus for producing direct reduced iron (DRI), also known as sponge iron, by means of direct contact of iron oxides with a stream of recycled and regenerated hot reducing gases containing hydrogen and carbon monoxide. The invention provides a way for decreasing the uncontained emission of CO2 to the atmosphere produced by combustion of carbon-bearing fuels in the reducing gas heater by substituting, at least partially, a gas stream mainly composed of hydrogen in lieu of the usual carbon-bearing fuels. The hydrogen fuel stream, depleted of CO2 by means of a physical gas separation unit (which can be a PSA/VPSA type adsorption unit, a gas separation membrane unit or combination of PSA/VPSA unit and a gas separation membrane unit) is derived from at least a portion of a stream of regenerated reducing gases being recycled to the reduction reactor.