England made a dream start when they were awarded a penalty with around four minutes on the clock after Raheem Sterling went down under a challenge from goalkeeper Hannes Haldorsson which was calmly slotted into the net by Wayne Rooney.
The lead lasted for just two minutes as Ragnar Sigurdsson volleyed home the equalising goal for Iceland.
Iceland took the lead for the first time in the game in the 20th minute through Kolbein Sigthorsson.
The Three Lions pressed for a leveller in the remainder of the first half, coming close when Harry Kane’s well- struck volley was tipped over the bar by Haldorsson.
Roy Hodgson’s men struggled after the restart failing to carve out clear cut openings with their opponents putting up a strong resistance in defence
Iceland nearly doubled their advantage six minutes before time but Joe Hart stopped Aron Gunnarsson’s effort.
In the end, it was Lars Lagerback’s men who made it to their first ever quarterfinals where they will come up against hosts France
Meanwhile , Roy Hodgson has stepped down as the manager of the English National team. Hodgson whose contract was up for renewal at the end of the competition made the decsion while addressing the press minutes after the loss to lowly ranked Iceland at the Eurprean Champioship.