That’s the question raised by Ron Giese in the latest issue of the Journal of Biblical Literature: Ronald L. Giese Jr., “‘Iron Sharpens Iron’ as a Negative Image: Challenging the Common Interpretation of Proverbs 27:17,” JBL 135, no. 1 (Spring 2016): 61-76.
Here is a portion of the abstract:

And here is Dr. Giese’s conclusion:
The proper context for “sharpen” the face is passages elsewhere in the OT in which the tongue, lips, and eyes are made to be “sharp.” That is, the tongue, lips, and eyes are used like a sword or arrows.
The meaning of the verse is therefore along these lines: Just as a hard iron hammer pounds soft iron into something sharp, ready for battle, in the same way a man causes his neighbor to go on the attack (i.e., have a “sharp face”).
What would cause a man to anger his neighbor? The verse does not say, but too much time together in conversation (based on vv. 4-16) is a good guess.
“As iron sharpens iron” is a great slogan for friendship, “tough love,” and accountability among those who care for one another. The positive interpretation . . . however, requires too many leaps over too great a distance. It requires
(2) that “face” means “character”; and
(3) that “sharpen” in the second half of the verse means “improve” when used with “face.”
The first and second of these meanings are possible but unlikely in the context.
The third has no basis elsewhere, and in fact the evidence is all to the contrary. Though we do not find “sharpen” used with “face” elsewhere, there are multiple instances of key parts of the face used with the verb “sharpen,” with all of them showing a negative, not a positive, interpretation.
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Ron Giese (PhD, University of Wisconsin-Madison) is administrative pastor at Desert Springs Church in Albuquerque, New Mexico, which hosts the annual Southwest regional conference of the Gospel Coalition each year.