Images from the Mars Science Laboratory (MSL) mission of lacustrine sedimentary rocks of Vera Rubin ridge on “Mt. Sharp” in Gale crater, Mars, have shown stark color variations from red to purple to gray. These color differences cross-cut stratigraphy and are likely due to diagenetic alteration of the sediments after deposition. However, the chemistry and timing of these fluid interactions is unclear. Determining how diagenetic processes may have modified chemical and mineralogical signatures of ancient martian environments is critical for understanding the past habitability of Mars and achieving the goals of the MSL mission. Here we use visible/near-infrared spectra from Mastcam and ChemCam to determine the mineralogical origins of color variations in the ridge. Color variations are consistent with changes in spectral properties related to the crystallinity, grain size, and texture of hematite. Coarse-grained gray hematite spectrally dominates in the gray patches and is present in the purple areas, while nanophase and fine-grained red crystalline hematite are present and spectrally dominate in the red and purple areas. We hypothesize that these differences were caused by grain size coarsening of hematite by diagenetic fluids, as observed in terrestrial analogs. In this model, early primary reddening by oxidizing fluids near the surface was followed during or after burial by bleaching to form the gray patches, possibly with limited secondary reddening after exhumation. Diagenetic alteration may have diminished the preservation of biosignatures and changed the composition of the sediments, making it more difficult to interpret how conditions evolved in the paleolake over time.