Alfred Finnbogason equalised after 90 minutes before Gylfi Sigurdsson bundled in the winner in the sixth minute of added time as Iceland avoided their first competitive home defeat in three years.
“It didn’t look like we could win it and I’m so happy we did,” said coach Heimir Hallgrimsson. “Every second ball fell for them and it was the sort of game where you hit the post and the ball goes out.
“After 85 minutes I’d have taken a draw but the players kept believing and you reap what you sow. This group is going to be very tight, Finland are a good side and will take a lot of points off the other teams.”
The 900 noisy visiting fans in a sell-out crowd of 10,000 were jubilant as the clock ticked down and were as shocked as their team at the final whistle.
Iceland marked the win with a ‘Viking Clap’ on the pitch while Finland’s supporters applauded their team despite the result.
The celebration, an intimidating slow chant accompanied by a unanimous clap, drew lots of attention at Euro 2016 in France.
Two of Iceland’s goals came from corners and from another they won a penalty for handball but Sigurdsson missed it, firing against the crossbar in the 51st minute.
Sigurdsson hit a post with another shot a few minutes later and the hosts looked like having a miserable night as goalkeeper Lukas Hradecky made a string of good saves.
Finland were inspired in the first half by attacking midfielder Robin Lod of Panathinaikos.
Lod was involved in the build-up for his side’s first goal, a header by Teemu Pukki from Kari Arkivuo’s cross. He then scored the second himself with a powerful left-foot shot in the 39th minute after Iceland had levelled through Kari Arnason.
Iceland, who joined group leaders Croatia on four points from two games, were without three regular starters because of injury, goalkeeper Hannes Halldorsson and forwards Jon Dadi Bodvarsson and Kolbeinn Sigthorsson.
They hope to have the trio back for Sunday’s home game against fourth-placed Turkey.
Finland are second from bottom with one point.