The interstitial loop is a unique signature of radiation damage in structural materials for nuclear and other advanced energy systems. Unlike other bcc metals, two types of interstitial loops, 1/2<111> and <100>, are formed in bcc iron and its alloys. However, the mechanism by which <100> interstitial dislocation loops are formed has remained undetermined since they were first observed more than fifty years ago. We describe our atomistic simulations that have provided the first direct observation of <100> loop formation. The process was initially observed using our self-evolving atomistic kinetic Monte Carlo method, and subsequently confirmed using molecular dynamics simulations. Formation of <100> loops involves a distinctly atomistic interaction between two 1/2<111> loops, and does not follow the conventional assumption of dislocation theory, which is Burgers vector conservation between the reactants and the product. The process observed is different from all previously proposed mechanisms. Thus, our observations might provide a direct link between experiments and simulations and new insights into defect formation that may provide a basis to increase the radiation resistance of these strategic materials.