Needing victory to guarantee top spot in European qualifying Group I, goals from Everton star Gylfi Sigurdsson and Johann Gudmundsson ensured Iceland would be on the plane to Russian Federation 2018, Foxsport.com reported.
Keeping the momentum going from its inspiring run to the 2016 European Championship quarterfinals, Iceland topped Europe Group I and advanced automatically to the finals in Russian Federation next year at the expense of favourite Croatia.
Serbia qualified for the World Cup for the first time since 2010 by beating Georgia 1-0 in Belgrade with a goal by Aleksandar Prijovic's in the 74th minute.
ABERDEEN star Kari Arnason has helped Iceland qualify for their first ever World Cup.
Croatia are also assured of a play-off place after a 2-0 defeat of Ukraine in Kiev to finish second in Group I behind Iceland.
Iceland had come into the qualification period off the back of reaching the quarter-finals of last year's European Championships in France, where they were beaten by the hosts.
Everton's Gylfi Sigurdsson and Burnley's Johann Gudmundsson got the goals on Monday evening.
It's a confirmation of the rise of the Scandinavian island nation after their shock win over England in a surprise run to the Euro 2016 quarterfinals.
Prijovic struck the victor on 74 minutes in Belgrade as Serbia finished top of European qualifying Group D, with the Republic of Ireland heading to the play-offs after a 1-0 victory over Wales in Cardiff.
Victory over Kosovo last night secured Iceland a place in next summer's Russian tournament.
Serbia, Wales and Republic of Ireland occupied the top three positions in Group D ahead of kick-off, with the two countries on the British Isles facing off in Cardiff.
Europe: Cristiano Ronaldo is set to return to Portugal's lineup for a decisive World Cup qualifier against Switzerland on Tuesday. The victor will take on the team which finishes fourth in the CONCACAF section over two legs for a place in Russian Federation.