This remote island in the middle of the North Atlantic was visited by early Viking sailors, sometimes staying there over winter. It seems to have first been settled by Celtic monks seeking isolation, then in the later 9th century by Norsemen bringing with them captured Celtic serfs. In this early mediæval period the climate was warmer and there was more forest and arable land than nowadays. During this early period the Icelanders established in 930 AD the world's oldest known law-making parliament, the Althing (Alþingi). 

The independent Icelandic Commonwealth lasted for over 300 years, Iceland was subsequently ruled by Norway and then Denmark. Conditions for Icelanders became harsher with climate changes and local disasters. In 1783 the Laki volcano erupted, with devastating effects - in the subsequent years over half of all livestock died. The resulting famine brought the death of a quarter of the population. Fallout from the Askja volcano eruption in 1875 devastated the Icelandic economy and again caused widespread famine. Over the next quarter century, 20% of the island's population emigrated, mostly to Canada and the US.

Although still tied to Denmark, Iceland became a sovereign state under the Danish Crown in 1918. During the Second World War Iceland was nominally neutral but was occupied by Allied forces, first British then American. Denmark granted Iceland complete independence in 1944. The second half of the 20th century saw substantial economic growth driven primarily by the fishing industry. In the 1970s came the Cod Wars - a series of disputes with the United Kingdom over Iceland declaring its fishing limits to be 200 miles offshore, an extension covering maritime areas traditionally used by British deep-sea fishermen.

The economy diversified greatly after the country joined the European Economic Area in 1994. Its economy moved towards financial services and investment banking, but Iceland was especially hard hit when the global financial crisis in 2008 triggered the collapse of its banks.