The country has a population of approximately 350,000; the previous smallest country to have reached the global football showcase was Trinidad & Tobago in 2006, with 1.3m people.
The team managed to make the quarter finals of that tournament, and also upset competition giant England before celebrating with their now-famous clap.
The penultimate night of the UEFA World Cup Qualifying rounds was largely bereft of both goals and entertainment value for long periods.
Iceland have won seven of their 10 Group I games in World Cup qualifying, BBC reports.
Antonio Candreva lifted Italy to a 1-0 win over Albania in their final World Cup qualifying game that assures the Azzurri are top seeds for November's play-offs.
Gylfi Sigurdsson put the hosts ahead in in the first half and Johann Gudmundsson made it 2-0 in the second.
Iran, South Korea, Japan and Saudi Arabia were the first four Asian nations to qualify.
The Eagles, captained by former Chelsea defender Branislav Ivanovic, were uninspiring in Belgrade but their 1-0 win against Georgia was enough to clinch top spot and ensure automatic qualification.
After the game against Kosovo, Iceland head coach Heimir Hallgrimsson said it was a odd feeling that his team would now be mentioned in the same breath as former World Cup greats.
Now, the World Cup in Russian Federation will also be graced by the popular northern Europeans and their colourful fans who started a clapping trend at the Euros that is sure to make its mark next year.
And while we're sure Iceland's celebrations are still well and truly underway - anyone heading to Russian Federation next year now has around eight months to prepare for scenes like this.