Ragnar Sigurdsson cancelled out Wayne Rooney's fourth-minute opener before Kolbeinn Sigthorsson's tame shot squirmed past England goalkeeper Joe Hart for an 18th-minute winner.
Three days on from Britain's vote to leave the European Union, England followed the country's lead by exiting Europe, their quest for a first title since the 1966 World Cup doomed to continue.
Also Read
England manager Roy Hodgson is now almost certain to lose his job, with Football Association chairman Greg Dyke having said recently that the team would have to "do well" in France for him to be offered a new contract.
Ironically, Hodgson's fate was sealed by his former protege Lars Lagerback -- Iceland's joint coach alongside Heimir Hallgrimsson -- who began his coaching career under the Englishman's tutelage in Sweden in the late 1970s.
As expected, Hodgson made six changes to his starting XI at a muggy Stade de Nice, which included a recall for Raheem Sterling.
The Manchester City forward was criticised for some insipid group-stage displays, but he made an excellent start, racing onto Daniel Sturridge's fine pass and drawing a foul from Iceland goalkeeper Hannes Halldorsson.
Rooney planted the penalty into the bottom-left corner to crown his 115th England appearance -- which tied David Beckham's record for an outfield player -- with a 53rd international goal.
Remarkably, his side's lead was to last only 34 seconds.
Hodgson had warned of the dangers of Aron Gunnarsson's long throw-ins prior to the game, but from the Iceland captain's right-wing missile, Kari Arnason headed the ball on and Sigurdsson charged in behind a dosing Kyle Walker to volley home from close range.
It drew a roar from the blue-shirted fans in the Iceland end and after Dele Alli and Harry Kane had fired narrowly over for England, they were screaming with disbelief in the 18th minute.
to Sigthorsson and with England's defenders standing off, the Nantes striker rolled a shot goal-wards that Hart could only palm into his bottom-left corner.
Having also allowed a Gareth Bale free-kick to squirm past him in the 2-1 win over Wales, it was the City goalkeeper's second major blunder of the tournament.
Kane threatened to provide an immediate riposte with a stinging volley that was brilliantly palmed over by Halldorsson, but in the main Hodgson's men were reduced to long-range potshots.
Hodgson made two attacking changes -- Jack Wilshere replacing Eric Dier at half-time, Jamie Vardy taking Sterling's place on the hour -- but despite their firepower, there was no craft whatsoever to England's approach play.
Had Ragnar Sigurdsson's overhead bicycle kick not flown straight at Hart early in the second half, meanwhile, England would have had a mountain to climb.
But Sigthorsson's goal was to prove enough, with Alli hooking over and Kane heading straight at Halldorsson before the final whistle brought England's players to their knees and sent the Iceland bench tearing onto the pitch in celebration.
You’ve reached your limit of {{free_limit}} free articles this month.
Subscribe now for unlimited access.
Already subscribed? Log in
Subscribe to read the full story →
Smart Quarterly
₹900
3 Months
₹300/Month
Smart Essential
₹2,700
1 Year
₹225/Month
Super Saver
₹3,900
2 Years
₹162/Month
Renews automatically, cancel anytime
Here’s what’s included in our digital subscription plans
Exclusive premium stories online
Over 30 premium stories daily, handpicked by our editors


Complimentary Access to The New York Times
News, Games, Cooking, Audio, Wirecutter & The Athletic
Business Standard Epaper
Digital replica of our daily newspaper — with options to read, save, and share


Curated Newsletters
Insights on markets, finance, politics, tech, and more delivered to your inbox
Market Analysis & Investment Insights
In-depth market analysis & insights with access to The Smart Investor


Archives
Repository of articles and publications dating back to 1997
Ad-free Reading
Uninterrupted reading experience with no advertisements


Seamless Access Across All Devices
Access Business Standard across devices — mobile, tablet, or PC, via web or app
