Kaolin clay samples were mixed with various amounts of Fe2O3 powder. The influence of this magnetic impurity on NMR relaxation and diffusion measurements on the water in this porous material was investigated. The NMR relaxation measurements showed a nearly mono-exponential decay, leading to the conclusion that the pore size distribution of the clay samples is either narrow and/or that the pores are interconnected very well. Both the longitudinal and the transverse relaxation rate depend linearly on the concentration of the Fe2O3 impurity. The NMR diffusion measurements revealed that the Fe2O3 causes internal magnetic field gradients that largely exceed the maximum external gradient that could be applied by our NMR apparatus (0.3 T/m). Additional SQUID measurements yielded the magnetization and magnetic susceptibility of the samples at the magnetic field strength used in the NMR measurements (0.8 T). A theoretical estimate of the internal magnetic field gradients leads to the conclusion that the water in the porous clay samples cannot be described by the commonly observed motional averaging regime. Probably an intermediate or a localization regime is induced by the large internal gradients, which are estimated to be on the order of 1 to 10 T/m in the pore volume and may exceed 1000 T/m at the pore surface.