The history of the Icelandic language began in the 9th century when the settlement of Iceland, mostly by Norwegians, brought a dialect of Old Norse to the island.

The oldest preserved texts in Icelandic were written around 1100, the oldest single text being Íslendingabók followed by Landnámabók. Some of the poetry, such as the Eddas, that were written down a little later nevertheless contain older language because poetic language was kept in memory unchanged over sometimes a remarkably long time. The most famous of these, written in Iceland from the 12th century onward, are without doubt the Icelandic Sagas, the historical writings of Snorri Sturluson, and the Poetic Edda.

The language of the era of the sagas is called Old Icelandic, a dialect of (Western) Old Norse, the common Scandinavian language of the Viking Age. The Danish rule of Iceland from 1380 to 1918 had little effect on the evolution of Icelandic, which remained in daily use among the general population: Danish was not used for official communications.

Though Icelandic is considered more archaic than other living Germanic languages, especially in its morphology and other grammatical aspects, as well as in its lexicon, the language has nevertheless been subject to some important changes. The pronunciation, for instance, changed considerably between the 12th and 16th centuries, especially that of vowels.

Nevertheless, written Icelandic has changed relatively little since the 13th century. As a result of this, and of the similarity between the modern and ancient grammar, modern speakers can still understand, more or less, the original sagas and Eddas that were written some 800 years ago. This ability is sometimes mildly overstated by Icelanders themselves, most of whom actually read the Sagas with updated modern spelling and footnotes—though otherwise intact.

The language of the Norwegian settlers Most of the original settlers of Iceland came from Western Norway, bringing with them the western dialect of Old Norse. Due to its geographic isolation and consequent lack of influence from other stratum languages, the development of the language was entirely independent. However, it would be wrong to suggest that the language that was brought to Iceland was completely homogeneous; even though most of the settlers were from western Norway, there were a number from other parts of the country and also from other Scandinavian countries. Therefore, the language that grew up in Iceland was influenced by all of the Norwegian dialects of the time. The close intermingling of the people of the island, especially at the Alþingi (the general meeting that took place at the beginning of each summer at Þingvellir) contributed to even out the differences between the various dialects: traits common to all dialects were reinforced, while the most marked differences gradually disappeared. Although it is not known exactly how the language developed, modern Icelandic has evolved less than other Scandinavian languages. The unique development of Icelandic, which eventually resulted in its complete separation from Norwegian and the other Scandinavian languages, began with the landnám or first settlement. Icelandic has lost all trace of the tonal nature of early Scandinavian languages, traces of which are noticeable in modern Norwegian and especially Swedish. Research has been carried out to identify certain traits of the language, for example the so-called preaspiration, but the results were inconclusive. Icelandic shares such characteristics with two other languages: Faroese and the Swedish spoken in Finland.

The Scandinavian period (550–1050) The period from 550 to 1050 is called the Scandinavian or "Common Nordic" period. During this time, a notably unified common language was spoken throughout Scandinavia. The key position of Denmark as the focal point of the whole area meant that the language was often simply called "Danish" (dǫnsk tunga). Even though the first hints of individual future developments were already identifiable in different parts of the vast region, there were no problems with mutual intelligibility.

With regard to the dǫnsk tunga spoken in Iceland, there are no written documents from this period. Ancient Scandinavian runes were certainly widely known but were never used to write on papyrus (except Codex Runicus) or skin. Few runic inscriptions have been found and nearly all are dated after 1200.

Ancient Scandinavian or Norse (1050–1350)

The period from 1050 to 1350 is known as Old Scandinavian, Old Nordic, or Norse. There are numerous manuscripts and documents dating from this period, which allows researchers to characterize Icelandic from this period accurately.

All of the documents use the Latin alphabet, which was introduced to Iceland in the 12th century. Laws were transcribed onto vellum for the first time in 1117–1118. The first manuscripts among those still in our possession date back to the second half of the 12th century. Sometime in the latter half of the 12th century the First Grammatical Treatise (Fyrsta Málfrœðiritgerðin) was composed, a highly original description of the language unique in Europe at the time. The treatise was concerned with the sounds of the language; it described the internal workings of the phonological system in much the same way as modern linguistic methodology. The manuscript, today kept in Reykjavík at the Handritastofnun Íslands ('Manuscript Institute of Iceland') is a later copy of the original text. Three other grammatical treaties were composed in the following decades.

Although the oldest manuscripts date back to around 1150, they show structures that were in use from around 900. This is particularly true of the ancient epic poetry, which, due to its metric structure and oral tradition, conserved notably archaic forms. Between 1050 and 1350 Icelandic began to develop independently from other Scandinavian and Germanic languages; it is particularly conservative in its inflectional morphology and notably homogeneous across the country. From the manuscripts it has not been possible to determine whether dialects ever existed in Iceland; all indications suggest that from the outset the language has maintained an extraordinary level of homogeneity.

Around 1300, the Danish language saw a very rapid evolution in both its phonology and its morphology. Given that changes to a spoken language are often only recorded later in the written language, it is probable that in spoken Danish these changes occurred around 1250 and perhaps even earlier. The rapid evolution of Danish (a simplification comparable to that seen between Old English and Middle English) gave rise to a marked difference between the north and south of Scandinavia. In 1350 Danish assumed characteristics that are still seen in the language today.

Norwegian and Swedish developed more slowly, but show equally notable differences from Icelandic, which is always more conservative and has maintained even to this day many common Scandinavian features.

In Norwegian a kind of vocalic harmony developed, in which a syllable after a stressed syllable with a high vowel () exhibited only a high vowel (systir 'sister', cf. Icelandic systir), while a syllable after a stressed syllable with a mid vowel () showed only a mid vowel (broþer "brother", cf. Icelandic ). Such innovation was only accepted in eastern Norwegian and in Swedish (Mod. Norwegian, Swedish ), while in Icelandic there is no trace of it.

With regard to consonants, Continental Scandinavian languages and most other Germanic languages lost the series of fricatives , which were retained only in Icelandic and English (which shows here a notably archaic phonological trait). They were replaced with the corresponding dentals (Norwegian, Swedish "heavy" "smith", cf Icelandic , (modern Icelandic , ).

Icelandic is the only Germanic language to have conserved the word-initial consonant sequences , at least from a graphic point of view (their pronunciation is in part modified by the desonorization of the second consonantal element): Icelandic hljóð, hrafn, hneta, cf English loud, raven, nut, Swedish ljud, ramn (toponymic only), nöt, German Laut, Rabe, Nuss.

Again along with English, Icelandic is unusual among Germanic languages to have conserved, if only at a local level, the pronunciation of the word-initial consonantal cluster : Icelandic hvað, hvalur , more commonly . In English what, whale, the represents /ʍ/ only in certain dialects. The other Germanic languages have consonantized the cluster: German was, Wal-fisch , Dutch wat, wal-vis, Swedish vad, . Until the early years of the 20th century Swedish maintained the orthography in words such as , , which is purely historical. In Danish one writes but does not pronounce : , , while in Nynorsk, in some cases, one writes and pronounces (), exactly as is usual in modern Icelandic (southern dialect and literary). There are also indications that was originally pronounced .

An important vocalic development, also from a morphological standpoint, was the disappearance of word-final -r with the addition of epenthetic , written as : Old Icelandic became Modern Icelandic .

In the old language the verbs forming past tense with the dental suffix (corresponding to -d in English) were apart in the first and third person, ending with -a in the first person but -i in the third person. The first person took the form of the third person and are now identical. This is the only alteration in person inflection from the old language, here in stark contrast to the other Scandinavian languages where they vanished completely and halved in Faroese.

"Classical Old Icelandic" In the field of textual scholarship, Classical Old Icelandic refers to a normalized version of written Icelandic based on the language present in the Old Icelandic Homily Book (c. 1200). This standard of normalization was developed by Ludvig Wimmer in 1877, and is widely used by publishers of editions of medieval texts today, such as Íslenzk fornrit, though other standards also exist. The purpose of the standard is to make the text more legible to the modern reader by removing variation and inconsistencies in original manuscripts, since the medieval language had no standard orthography. Classical Old Icelandic can also be used as a standardized form of the language for new learners.

Middle Icelandic (1350–1550)