Multiferroic YMn_1−xFe_xO₃(020) (x = 0.125, 0.25, 0.50) epitaxial thin films with an orthorhombic structure (space group Pbnm) were prepared on a YAlO₃(010) substrate by pulsed-laser deposition. Upon Fe substitution, the b-axis was clearly shortened, whereas the a- and c-axes were slightly lengthened based on XRD analysis. To understand the influence of orbital polarization and the Jahn–Teller effect of Mn³⁺ on Fe substitution and also the local octahedral-site distortion of Fe³⁺ in an environment of Jahn–Teller-active Mn³⁺ ions in YMn_1−xFe_xO₃ films, we measured the polarization-dependent X-ray absorption spectra at the Mn-L_2,3 and Fe-L_2,3 edges, and also simulated the experimental spectra using configuration-interaction multiplet calculations. Although Δe_g for the Mn³⁺ ion decreased from 0.9 eV in pure YMnO₃ to 0.6 eV in the half-Fe-substituted sample, a single e_g electron was still strongly constrained to the d_3y²−r² orbital for all the Fe concentrations tested. The largest Δe_g, 0.5 eV, for the Fe³⁺ ion was derived for a sample with 12.5% Fe substitution, and gradually decreased to 0.15 eV for the half-Fe-substituted sample. The local octahedral-site distortion of the Fe³⁺ ion inside the YMnO₃ lattice was similar to that of the Mn³⁺ ion, whereas the Jahn–Teller distortion and GdFeO₃-type distortion of the Mn³⁺ ion were decreased by the spherical high-spin Fe³⁺ ions. The combination of the experimental and theoretical data provides both profound insight into the variation of the Jahn–Teller distortion and orbital anisotropy and instructive information about the magnetic structures in these orthorhombic YMn_1−xFe_xO₃ thin films.