In 1874, a millennium after Iceland's first settlement, Denmark granted the island its first constitution and limited home rule over domestic affairs. This was a significant moment in Iceland’s gradual path toward independence. In 1903, the constitution was revised, and in 1904, the role of a minister for Icelandic affairs was created. Hannes Hafstein became the first to hold this position, residing in ReykjavĂk and becoming directly responsible to the Althing. This expanded Iceland’s self-governance, further reducing Danish control.
The momentum for greater independence continued to build, and on December 1, 1918, Iceland and Denmark signed the Danish–Icelandic Act of Union. This act recognized Iceland as a fully sovereign state, united with Denmark through a personal union under the Danish crown. Iceland now had its own flag and control over most of its internal affairs, while Denmark handled its foreign policy and defense. Iceland was declared permanently neutral, with Denmark responsible for notifying other nations. The act was set for revision in 1940, with the option for Iceland to unilaterally revoke it by 1943 if a new agreement wasn't reached.
By the 1930s, the Icelandic consensus was clear: complete independence would be pursued by 1944 at the latest, as the nation steadily moved toward fully severing ties with Denmark.