Intimate interconnection of crystal growth, (oriented) aggregation and phase transformation seem common in the formation of nano-and microcrystalline materials from solutions. Yet, the mechanistic linkages between the different processes have not been fully understood. In this work, we studied the hydrothermal growth of akaganeite (beta-FeOOH) nanorods and their transformation to micron-sized hematite (alpha-Fe2O3) spindles using high-resolution cryogenic transmission electron microscopy (cryo-TEM). Only akaganeite particles and hematite spindles were detected in the samples. Further, cryo-electron 3D tomograms show that akaganeite nanorods were aggregated into loose three-dimensional networks with some embedded hematite spindles. Based on our cryo-TEM and additional X-ray diffraction, electron microscopy, and chemical data, we propose the following mechanism: first, formation of the early-stage hematite spindles is driven by phase stability change due to increase in size caused by oriented aggregation of akaganeite. Then, akaganeite particles continue to transform to hematite upon contact with and recrystallization onto hematite surfaces, making hematite grow with a constant aspect ratio and forming micronsized nano-porous single-crystal spindles. Our growth model interprets experimental observations well and it resolves previous long-time debate over whether the hematite spindles are formed via classical Ostwald ripening or by oriented aggregation of hematite nanoparticles. Possibly, this aggregation-based concurrent growth and transformation model may also be applicable to crystal growth and phase transformation in other systems.