Nani opened the scoring 31 minutes into the first half with a cool finish, but Portugal were left stunned as Birkir Bjarnason equalised early on in the second half due to a defensive error from full-back Vierinha.
Portugal dominate early on
Iceland nearly took an early lead two minutes into their first major tournament fixture through fan favourite Gylfi Sigurðsson. Using the high press, the Scandinavian country won the ball just inside of the Portuguese half, allowing the Swansea City midfielder to go through on goal. However, he could not hold his nerve, giving goalkeeper Rui Patrício a comfortable save following the move off the left flank.
Nonetheless, that would be the only notable chance of the half for Iceland as Portugal dominated the following 40 minutes. Iceland goalkeeper Hannes Halldórsson made multiple impressive saves to keep the score level at 0-0 - the most noteworthy being a fantastic piece of innovation by saving a low Nani header, destined to hit the back of the net, with his feet.
Halldórsson's heroics could only keep an imposing Portugal at bay for 31 minutes, after Nani met a low André Gomes cross to open the scoring with a finish at the near post. Heimir Hallgrímsson and Lars Lagerbäck will have been disappointed with their side's defensive errors as the Fenerbahce winger was allowed to burst into the box unmarked, leaving Halldórsson helpless.
Portugal grew in confidence as the half went on following their opening goal. They dominated possessio,n constantly looking to use the threat of their talented wingers, which in turn forced Iceland to sit deeper into their own territory. This tactical change prevented the score from increasing, and also slowed the tempo of Fernando Santos' men's counter-attacks.
Iceland level early
A Selecção were made to pay for not taking the numerous chances they had in the first half after midfielder Birkir Bjarnason netted the Icelandic equaliser just five minutes into the second period. VfL Wolfsburg full-back Vierinha left Bjarnason completely unmarked at the back post, where he volleyed home a terrific Johann Gudmundsson cross.
The Portuguese were completely stunned by Bjarnason's goal. Despite this, their dominance in possession continued to be a huge factor in the game. Iceland remained resilient though and held a strong defensive shape to prevent Portugal from creating any clear cut chances throughout the majority of the second half.
Portugal head coach Santos made his first change of the evening in an attempt to find a way past the solid Iceland defence. 18-year-old Renato Sanches was brought on for a quiet João Moutinho in an attempt to inspire the Portuguese to victory. Instantly following the substitution, Nani came close with a feint header off of a Raphaël Guerreiro set-piece, with it just going wide.
Iceland hold on for a draw
Aron Gunnarsson looked to be Iceland's last real offensive threat as, as time ticked on, the side looked increasingly exhausted. Nevertheless, Portugal continued to persevere as substitute Ricardo Quaresma had his shot saved at the near post by Halldórsson.
With Iceland looking to hold out for a point Éder replaced Gomes in search of a Portugal winner. Both sides came close to finding a third goal, but both Cristiano Ronaldo and substitute Alfreð Finnbogason could only find the opposing keepers' gloves with their attempts.
Ronaldo twice had the opportunity to find a winner with two late free-kicks, but both struck strong Icelandic walls.
Following the earlier Group F fixture, where Hungary defeated a ten-man Austria 2-0, this result leaving both teams on one point each - tied for second and third.