After the union, Iceland was ruled by Denmark until obtaining its independence (under a Danish constitutional monarchy) in 1918.

[3] In June 1944, Iceland became a republic and both nations opened embassies in each other's capitals, respectively.

Since the establishment of diplomatic relations between Iceland and Sweden, both countries have actively participated in the international arena to discuss issues affecting the Nordic nations such as climate change, Arctic policy and in mutual defense outside of NATO.

[citation needed] Both countries have participated in foreign expeditions such as in Afghanistan with the International Security Assistance Force.

During the Icelandic financial crisis from 2008 to 2011, Sweden's National Bank issued 5 billion Swedish Krona (€520 million) to Iceland's Kaupthing Bank in order to pay "depositors and other creditors" affected by the financial crisis.