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As of 10th April 2009:

According to the provisions of the Icelandic Citizenship Act nr. 100/1952:

Prior to 24th february 2003 any icelandic citizen that has voluntarily acquired any foreign nationality has instantly lost his icelandic nationality.

To be able to pass icelandic nationality on their descendants, child's mother has to be icelandic citizen, or if only child's father is icelandic citizen, he has to be married to the child's mother for the citizenship to be passed authomaticaly. Otherwise there is an option of applying to the Minister of Justice for the confirmation of citizenship before the child reaches the age of 18 years.

If your grandparents have acquired Canadian citizenship before their children turned 18 years of age, (applicable before 24th february 2003), all of them lost Icelandic citizenship.

If your grandparents have never acquired Canadian citizenship or have acquired it after your parent(s) turned 18 years of age, your parent(s) would have preserved their icelandic nationality and if your parent(s) were born with Canadian nationality through either ius soli or ius sanguini, they would be able to pass their both nationalities on their descendants.

However, if your parents or yourself were born outside of Iceland and have never lived in Iceland, they (or you) would have lost their icelandic citizenship on 22nd birthday along with any minor children under the age of 18 years, unless they have obtained special dispensation from the President of Iceland, or if after 2003, from the Minister of Justice of Iceland. This provision doesn't apply to anyone who holds no other nationality but icelandic and might therefore become stateless.

Please also note that any icelandic national born in Iceland, that has lived in Iceland until 18 years of age, that has lost his/her icelandic nationality might re-aquire it after 2 years of residency in Iceland (no residence/work permit will be required, as they will be exempt from this requirement). Any minor children under 18 years will aquire nationality along with their parent.

And finally there is an option of applying for a grant of citizenship to the icelandic Parliament (Althingi) and the good part of it is that in this case there are no requirements to satisfy as the Althingi may grant icelandic citizenship at its pleasure.

Annually about 30-50 individuals receive their nationality through this option.

Hope this helps and good luck

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Q: Can a Canadian get a Icelandic passport if grandparents Icelandic?
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