However, the initial attempt failed as a group of Althing representatives rejected the new party's platform, which was inspired by that of UK Prime Minister Tony Blair's centrist New Labour, and broke away before the merger to found the Left-Green Movement, a party based on more traditional democratic socialist values as well as Euroscepticism and green politics.

The party fell back some in the 2007 Icelandic parliamentary election under Ingibjörg Sólrún Gísladóttir, winning 18 seats, as the Left-Green Movement began eating into their left-leaning voter base.

[6] In the snap 2009 parliamentary election called in the aftermath of the Icelandic financial crisis, the Social Democratic Alliance under the leadership of Jóhanna Sigurðardóttir emerged as the largest party and formed a coalition government with the Left-Green Movement, which was the country's first majority left-wing government.

[8] The party lost substantial support in the 2013 parliamentary election, its first under new leader Árni Páll Árnason who replaced Jóhanna in February of that year.

He stepped down after the disappointing results in 2021, and was replaced by Kristrún Frostadóttir in 2022, who remains the current chair of the party.

President Halla Tómasdóttir gave the Social Democratic Alliance the first mandate to form a government,[10] and Kristrún became Prime Minister in a government led by the Social Democratic Alliance and supported by Viðreisn and the People's Party.

[11] With Kristrún as Prime Minister and Halla as President, it was the first time in history Iceland had women in both offices simultaneously.