Superconductivity in the iron pnictides emerges from metallic parent compounds exhibiting intertwined stripe-type magnetic order and nematic order, with itinerant electrons suggested to be essential for both. Here we use x-ray and neutron scattering to show that a similar intertwined state is realized in semiconducting KFe_{0.8}Ag_{1.2}Te_{2} (K_{5}Fe_{4}Ag_{6}Te_{10}) without itinerant electrons. We find that Fe atoms in KFe_{0.8}Ag_{1.2}Te_{2} form isolated 2×2 blocks, separated by nonmagnetic Ag atoms. Long-range magnetic order sets in below T_{N}≈35 K, with magnetic moments within the 2×2 Fe blocks ordering into the stripe-type configuration. A nematic order accompanies the magnetic transition, manifest as a structural distortion that breaks the fourfold rotational symmetry of the lattice. The nematic orders in KFe_{0.8}Ag_{1.2}Te_{2} and iron pnictide parent compounds are similar in magnitude and in how they relate to the magnetic order, indicating a common origin. Since KFe_{0.8}Ag_{1.2}Te_{2} is a semiconductor without itinerant electrons, this indicates that local-moment magnetic interactions are integral to its magnetic and nematic orders, and such interactions may play a key role in iron-based superconductivity.