High-resolution photoemission spectroscopy and ab initio calculations have been employed to analyze the onset and progression of d−sp hybridization in Fe impurities deposited on alkali metal films. The interplay between delocalization, mediated by the free-electron environment, and Coulomb interaction among d electrons gives rise to complex electronic configurations. The multiplet structure of a single Fe atom evolves and gradually dissolves into a quasiparticle peak near the Fermi level with increasing host electron density. The effective multiorbital impurity problem within the exact diagonalization scheme describes the whole range of hybridizations.