Highly crystalline powder of bismuth oxyiodide in the form of micro-platelets was synthesized by a microwave assisted hydrothermal process. Application of this novel and environmentally friendly technique in the synthesis of BiOI has never been reported before. Electronic structure of the obtained semiconducting compound was characterized by the spectroscopic methods, i.e. the reflectance and fluorescence spectroscopy as well as the electrochemical impedance spectroscopy. Mott–Schottky analysis of this material was performed for the first time and indicated the n-type conductivity of the sample. Photoelectrochemical properties were determined using the pulsed photocurrent spectroscopy technique which is also a novel approach in the case of BiOI. Bismuth oxyiodide exhibits the Photoelectrochemical Photocurrent Switching Effect. The anodic-to-cathodic photocurrent transition occurs at ca. 0.5 V vs. NHE. The switching effect arises due to the presence of oxygen dissolved in the electrolyte and makes this material promising from the point of view of optoelectronic applications.