Iceland is not a member of the European Union, but it is part of the European Economic Area (EEA) and the Schengen Area, which is why so many travellers assume otherwise. This matters for trip planning because it affects currency, mobile roaming, and what to expect at the border, even though it has little effect on the actual mechanics of picking up a rental car and driving around the country.
Short answer: is Iceland in the EU?
No. Iceland has never joined the European Union. It applied for membership in 2009, talks stalled in 2013, and in a referendum on 29 August 2026 voters narrowly rejected resuming them (52.8% voted no, according to the official result announced by Landskjörstjórn, Iceland's National Electoral Commission, on 22 September 2026; last checked October 2026). Iceland is, however, a member of the EEA (giving it access to the EU single market) and the Schengen Area (allowing passport-free travel with other member countries). For a traveller, the practical effect is: no EU membership, but mostly EU-like travel convenience.
Is Iceland part of Europe?
Yes, geographically and culturally Iceland is part of Europe, even though it sits in the North Atlantic between Europe and North America. Politically, though, "being in Europe" and "being in the EU" are two different questions, Iceland answers yes to the first and no to the second.
Iceland shares Nordic ties with Denmark, Norway, Sweden and Finland, uses a Germanic language rooted in Old Norse, and has taken part in Eurovision since 1986. Culturally, it behaves like a European nation. Politically, it has deliberately stayed outside the EU's institutions. If you want more on how this shapes everyday life and travel norms, Icelandic culture is a useful next read.
Why isn't Iceland part of the EU?
Iceland has stayed outside the EU mainly to protect control over its fisheries, agriculture, and monetary policy, three areas EU membership would put partly under Brussels' authority. Public opinion on joining has shifted over the decades but has not produced a clear majority in favour.
The main reasons usually cited:
- Fisheries control, Iceland's economy depends heavily on fishing, and it prefers to set its own quotas and manage its own waters rather than follow the EU's Common Fisheries Policy.
- Agricultural independence, Iceland maintains its own support system for local farming rather than adopting EU-wide rules.
- Currency and monetary policy, keeping the Icelandic króna gives the country more flexibility to manage its own economy, especially after the 2008 financial crisis.
- Sovereignty over resources and regulation, many Icelanders are wary of ceding decision-making power on issues that affect a small, resource-based economy.
Iceland did formally apply for EU membership in 2009, in the aftermath of its banking collapse, but accession talks were paused in 2013 and have not restarted since.
Iceland and the European Economic Area (EEA)
Iceland is a full member of the EEA, which lets it participate in the EU's single market without being an EU member state. The EEA groups all EU countries together with Iceland, Norway and Liechtenstein.
Through the EEA, Iceland gets:
- Free movement of goods with EU countries
- Freedom to provide and receive services across borders
- Free movement of people for work, study and travel
- Access to a large share of EU regulations and programs
What Iceland does not get through the EEA is a vote. It follows many single-market rules but has no seat in EU decision-making bodies, a key distinction from actual membership.
Is Iceland part of the Schengen Area?
Yes. Iceland has been part of the Schengen Area since 2001, which is the other main reason travellers often assume it's in the EU. Schengen membership means passport-free travel between Iceland and other Schengen countries, regardless of EU status.
For visitors, this means:
- If you're arriving from another Schengen country, you typically won't face passport control on entry to Iceland.
- Travellers combining Iceland with a trip to mainland Europe move between Schengen countries without repeated border checks.
- Visitors from outside Schengen (including the US, UK, Canada and Australia) still go through standard passport control on arrival, though this is usually straightforward at Keflavik.
EU vs EEA vs Schengen, how Iceland fits
| Feature | European Union (EU) | EEA membership | Schengen Area |
|---|---|---|---|
| Political union | Yes | No | No |
| Single market access | Yes | Yes | No |
| Free movement of people | Yes | Yes | Yes |
| Common currency (euro) | Some members | No | No |
| Passport-free travel | Partially | Partially | Yes |
| Iceland included? | No | Yes | Yes |
This table is the clearest way to see why the "is Iceland in the EU" question feels confusing, Iceland ticks the boxes for two of the three frameworks that usually go together in people's minds, just not the political one.
Does Iceland use the euro?
No. Iceland's official currency is the Icelandic króna (ISK), not the euro. With a population of under 400,000, Iceland is sometimes described as running a "micro-currency," which gives it more flexibility over monetary policy than it would have inside the eurozone.
For travellers this means:
- You'll pay in króna for most things, though prices are often shown in ISK only.
- Credit and debit cards are accepted almost everywhere, including for small purchases and fuel.
- Carrying cash is rarely necessary.
Adopting the euro would effectively require EU membership, and that isn't currently on Iceland's political agenda. If you want a fuller breakdown of paying and budgeting, see this guide to currency in Iceland.
What Iceland's EU status actually means for a self-drive trip
For most self-drive travellers, Iceland's position outside the EU changes very little about the actual trip, it mainly affects currency, roaming, and how you think about entry requirements. Driving itself works the same way regardless of EU status. If you're deciding between a 2WD and 4x4, that's a separate and more useful question, see do you need a 4x4 in Iceland and the guide to 4x4 vs 2WD in Iceland.
Entry and documents. Schengen membership means smooth entry for travellers coming from other Schengen countries, and standard passport checks for those arriving from outside Schengen, including the US, UK, Canada and Australia. If you have questions about which driving licence documents you'll need at pickup, the FAQ page covers current requirements.
Currency and payments. Since Iceland isn't in the eurozone, budget in króna rather than euros, and don't assume euro cash will be useful, cards cover almost everything from fuel to parking meters. Some tourist-facing businesses may occasionally accept euros, but at a poor exchange rate.
Mobile roaming. Because Iceland is in the EEA, the EU's roam-like-at-home rules apply there, so a SIM from an EU or EEA country works much as it does at home; if your SIM is from outside the EU and EEA, it's worth checking with your provider before you rely on your regular data plan.
Booking and picking up a car. None of Iceland's EU/EEA/Schengen status affects how car rental works here. What matters more for a smooth start to your trip is choosing the right vehicle for your route and season, understanding what's included in your insurance, and knowing how pickup works at Keflavik. With Blue Car Rental, CDW, SCDW, Gravel Protection, Theft Protection and Third-Party Liability come standard with every rental, while tyre cover and water damage protection for legal river crossings are only included if you add the Liability Waiver. Blue Car Rental's online check-in lets you complete paperwork before you land, and customers who add the Liability Waiver and complete online check-in can collect their car from a key box (24/7 at Keflavik Airport, 06:00-21:00 at the Reykjavik City Office) instead of queuing at a counter, useful after a long-haul flight regardless of which passport you're travelling on. For a broader walkthrough of vehicle classes, insurance layers, and pickup logistics, this guide to booking a car in Iceland is a good starting point, and the insurance options page explains what's covered as standard.
Iceland's trade and economic relationship with the EU
Very close, even without membership. The EU is Iceland's biggest trading partner, and the EEA agreement keeps a large share of EU single-market regulation in place across Icelandic business. This is the practical trade-off behind Iceland's position: close economic integration with Europe, paired with independence in the sectors, fisheries, agriculture, currency, that Icelanders have consistently wanted to keep under national control.
Could Iceland join the EU in the future?
It's possible, but nothing is currently underway. Iceland's 2009 application stalled in 2013, voters rejected resuming talks in a referendum on 29 August 2026, and any renewed push would depend on shifts in public opinion, economic conditions, and the political priorities of a given government. For now, Iceland continues to rely on EEA membership for market access while keeping full sovereignty over the issues that have kept it out of the EU so far.
Final answer: is Iceland in the EU?
No, Iceland is not in the European Union, and there's no ambiguity there. What creates the confusion is that Iceland is deeply integrated with Europe through the EEA and Schengen Area, uses European travel norms, and shares strong cultural ties with the continent. For a traveller, the honest summary is this: expect króna instead of euros, expect Schengen-style border rules if you're coming from another Schengen country, and don't expect any of this to complicate the actual logistics of renting a car and driving around Iceland.
HOW BLUE CAR RENTAL SUPPORTS LOCAL COMMUNITIES IN ICELAND
