Iceland terminated its union with Denmark in 1944, when it became an independent republic. Until then the Swiss legation in Copenhagen had represented Switzerland's interests in Iceland. Switzerland recognized the Republic of Iceland in January of 1947, and the two countries have maintained diplomatic relations since 1951. The Swiss Embassy in Oslo, Norway, is responsible for Swiss interests in Iceland. Icelandic interests in Switzerland are represented by the Icelandic Embassy in Brussels. Iceland maintains a consulate in Berne and consulates general in Geneva and Zurich.

The two countries have bilateral contacts in connection with the European Free Trade Association (EFTA), the Organization for Security and Co-operation in Europe (OSCE) and the Council of Europe. Trade between the two countries is marginal.