1985–86 was the 11th season that Division 1 operated as the second tier of ice hockey in Sweden, below the top-flight Elitserien (now the Swedish Hockey League).
Division 1 was divided into four starting groups of 10 teams each.
The top two teams in each group qualified for the Allsvenskan, while the remaining eight teams had to compete in a qualifying round in which the results carried over from the first round.
The last team in each of the qualifying groups was relegated directly to Division 2, while the second-to-last-place team had to play in a relegation series.
The third to sixth ranked teams in the Allsvenskan qualified for the second round of the playoffs.