Ireland fielded an experimental side as Martin O’Neill used the game to assess his squad options as Conor Hourihane, John Egan, Daryl Horgan and Andy Boyle all received their international debuts.
It was a difficult start for Egan who got a clashed with Icelandic striker Jon Dadi Bodvarsson early on which led to him requiring a bandage for the rest of the game.
Both sides struggled to create chances until Iceland took the lead. Egan bundled over striker Kjartan Henry Finnbogason 25-yards out and Hordur Bjorgvin Magnusson curled the ball over the Irish wall, into the bottom left-hand corner with Keiren Westwood unmoved in the 19th minute.
Ireland almost pulled themselves level 10 minutes from the break as James McClean, who was playing in a central attacking position on the night, crossed for Kevin Doyle who got in front of his defender but the header went narrowly wide.
Former Dundalk duo, who now play for English Championship side Preston North End, Andy Boyle and Daryl Horgan were introduced with just under half an hour remaining to a rapturous Aviva Stadium welcome for their international debuts.
Horgan was consistently dangerous from wide areas as his low cross was narrowly missed by James McClean in the 67th minute before his looping cross from left was well defended by Sverrir Ingi Ingason under pressure from Doyle.
Bristol City winger Callum O’Dowda was brought on and almost made an immediate impact as he picked up the ball 40-yards out and drove towards goal, taking on two Icelandic before his low effort was deflected wide with 15 minutes remaining.
Ireland continued to press forward but failed to find the goal despite Andy Boyle’s late header which was well saved to see Iceland win the international friendly at the Aviva Stadium
Republic of Ireland: Westwood (GK), Christie, Egan (Boyle 62), Pearce, Brady, McGeady (O’Dowda 72) Hendrick (Gleeson 62), Hourihane (O’Kane 62), Hayes (Horgan 62), McClean (Long 71), Doyle.
Subs: Doyle (GK), Randolph (GK), Keogh, Ward, Meyler.
Iceland: Kristinsson (GK), Saevarsson (Jonsson 84), Ingason, Sigurdsson (Eyjolfsson, 53), Sigurdarson (Omarsson 64), Bodvarsson, Skulason (Smarason 78), Gunnarsson, Magnusson, Gislason (Skulason 88), Finnbogason (Karlsson 71).
Subs: Halldorsson (GK), Jonsson (GK), Kjartansson, Arnason, Sigurdarson.