Iceland fought back from two goals down to punish a lacklustre Wales despite the visitors' strong start.
It was an accomplished first half for the Dragons, showing a different side to themselves with a number of long passes and keeping the ball around the back four.
Brennan Johnson put Craig Bellamy's side ahead. His simple tap in came after Harry Wilson's bobbling shot could not be cleared in time off the line by Iceland goalkeeper Hakon Valdimarsson.
Wilson did manage to put his name on the scoresheet, firing in with ease after meeting a lovely ball over the top from Neco Williams.
The hosts, who could only register one shot on target in the first half, were radically better after the break, picking at the Welsh goal with relative ease.
A sucker punch one-two gave them deserved equality on the scoreline around twenty minutes from time. Logi Tomasson scoring the first and making Danny Ward's unfortunate own goal.
In the Group 4 of the UEFA Nations League B, Iceland sit third with four points and Wales are a point ahead in second spot.
-
Story of the Match
Joe Allen's much-publicised return to the squad will have to wait until Monday as the Swansea City midfielder was left out of the trip to Reykjavík.
Iceland made four changes from their defeat 3-1 to Türkiye, with Valgeir Fridriksson, Sverrir Ingason, Willum Willumsson and Orri Oskarsson coming into the side.
Meanwhile, Jordan James, Brennan Johnson and Sorba Thomas were the changes to the starting eleven from last month's victory over Montenegro.
A composed Welsh first half
It was a nervy opening from both sides. Wales stretched the pitch wide to try and defy Iceland's tight mid-block and uncharacteristically aimed to play long balls instead of working it through the centre.
Ten minutes in, however, the deadlock was broken from such a looping ball. Neco Williams' pass on the halfway line soared its way into the penalty area, finding the feet of Harry Wilson.
The Fulham man's shot squeezed past keeper Valdimarsson, whose attempt to clear it off the line fell perfectly to Johnson to tap in his seventh goal in as many outings.
The olive green turf was not the kindest to quick ground passing though Wales were able to gain more control of the tempo. Their carefully timed counter pressing was also particularly impressive to keep the Icelandic back four on their toes.
It would be thirteen minutes until the next major chance. Wilson picked up the ball on the edge of the box, with his curling shot being deflected onto the post.
The Williams-Wilson combination once again proved delightful just short of half-hour in. Another glorious ball over the top from the left-back reached on-rushing Wilson, whose touch and sublime finish epitomised the confidence he has exuded in Bellamy's system.
Moments later, the Nottingham Forest defender was again involved. This time, preventing Johann Gudmundsson's shot from going in with a goal-line clearance.
Gudmundsson would get another chance to pull one back from a close range free kick, but the Iceland skipper's effort arched just over the crossbar.
Wales came close to a third four minutes from half-time during a rare foray into the middle of the pitch. Wilson, this time, took the role of creator, lacing through a pinpoint through ball to Thomas. However, the Nantes winger could not quite lift it over Valdimarsson to further compound a mature first forty-five.
Iceland turn the tide after the break
After the interval, Iceland came out refreshed and with much more attacking intent.
A well-work move fell to substitute Mikael Ellertsson, whose shot went narrowly wide, and Oskarsson struck the crossbar - both within the opening five minutes.
The much-improved Oskarsson - central in all of the home side's early second half chances - fashioned another chance from close in that was caught by goalkeeper Ward.
Fifteen minutes of the second half hurried by and Wales had not yet been able to escape their own half, struggling to find the space to both keeping possession or launch balls forward.
Oli Cooper's long-ranged strike eventually drew a save after the Dragons crept up the pitch. Spoilers but... this was to Wales' only attempt of the second half.
Åge Hareide's side kept pushing for a goal. Ward's strong save cast aside Gudmundsson's powerful effort for a corner - from which came their way back into the game.
Another half-time change, Tomasson, latched onto the short corner with a superb first time outside-of-the-boot shot, which raced past the Leicester City keeper.
Tomasson was again on hand to make the strangely subdued Wales pay. Darting past Connor Roberts down the left-hand side enabled him to surge across the by-line. His attempted cut back into the 18-yard box deflected off Ward's outstretched arm and nestled across the line.
With ten minutes to go, Wes Burns gifted Oskarsson an opportunity to bag a deserved goal. The Ipswich Town winger's pass towards his own goal acting as a reverse through ball, and was lucky to see the Iceland striker fire wide. Quite the opposite impact to Hareide 's changes.
Continued dominance from Iceland saw Jon Thorsteinsson rattle the post after a slick counter attack. Bellamy's side could not seemingly wait for the final whistle to blow after a poor second half repealed all the good work of the first.
Iceland play host to Türkiye on Monday while Wales welcome Montenegro.
-
Player of the Match - Logi Tomasson
This accolade was Neco Williams' to lose after a brilliant first half, though he was part of a Welsh defence that put up a feeble showing after swapping ends.
After his introduction, Tomasson's directness and strength punctured Wales' right-hand side at a crucial time. His clinical finishing giving his nation a richly deserved route back into the game before being the source of the equaliser.
