1981 in Iceland

Incumbents

• President - Vigdís Finnbogadóttir
• Prime Minister - Gunnar Thoroddsen

Events

• Iceland no longer has an army due to a shortage of money
• Pétur Sigurgeirsson became the eleventh Bishop of Iceland, succeeding Sigurbjörn Einarsson in the position.

Births

• 7 January - Ármann Smári Björnsson, footballer
• 22 March - Rakel Logadóttir, footballer
• 29 April - Ragnhildur Steinunn Jónsdóttir, television personality
• 13 July - Helgi Daníelsson, footballer
• 31 August - Örn Arnarson, swimmer.
• 5 September - Logi Gunnarsson, basketball player
• 4 October - Friðrik Ómar, singer
• 12 October - Indriði Sigurðsson, footballer
• 17 October - Snorri Guðjónsson, handball player
• 10 December - Hólmar Örn Rúnarsson, footballer
• 14 December - Haraldur Freyr Guðmundsson, footballer

Deaths

• 28 July - Magnús Kjartansson, journalist, writer, and politician.