Understanding nuclear level densities and radiative strength functions is important for pure and applied nuclear physics. Recently, the Oslo Cyclotron Group has developed an experimental method to extract level densities and radiative strength functions simultaneously from the primary {gamma} rays after a light-ion reaction. A primary {gamma}-ray spectrum represents the {gamma}-decay probability distribution. The Oslo method is based on the Axel-Brink hypothesis, according to which the primary {gamma}-ray spectrum is proportional to the product of the level density at the final energy and the radiative strength function. The level density and the radiative strength function are fit to the experimental primary {gamma}-ray spectra, and then normalized to known data. The method works well for heavy nuclei. The present measurements extend the Oslo method to the lighter mass nuclei {sup 56}Fe and {sup 57}Fe. The experimental level densities in {sup 56}Fe and {sup 57}Fe reveal step structure. This step structure is a signature for nucleon pair breaking. The predicted pairing gap parameter is in good agreement with the step corresponding to the first pair breaking. Thermodynamic quantities for {sup 56}Fe and {sup 57}Fe are derived within the microcanonical and canonical ensembles using the experimental level densities. Energy-temperature relations are considered using …