Prohibition in Iceland went into effect in 1915 and lasted, to some extent, until March 1, 1989 (since celebrated as "Beer Day"). The ban had originally prohibited all alcohol, but from 1935 onward only applied to "strong" beer (with an alcohol content of 2.25% or more).
In a 1908 referendum, Icelanders voted in favor of a ban on all alcoholic drinks, going into effect Jan. 1, 1915. In 1921, the ban was partially lifted after Spain refused to buy Iceland's main export, fish, unless Iceland bought Spanish wines; then lifted further after a national referendum in 1935 came out in favor of legalizing spirits. Strong beer (with an alcohol content of 2.25% or more), however, was not included in the 1935 vote in order to please the temperance lobby -- which argued that because beer is cheaper than spirits, it would lead to more depravity.
As international travel brought Icelanders back in touch with beer, bills to legalize it were regularly moved in the Althing (Icelandic Parliament), but inevitably were shot down on technical grounds. Prohibition lost more support in 1985, when the Minister of Justice (himself a teetotaler) prohibited pubs from adding legal spirits to legal non-alcoholic beer (called "pilsner" by Icelanders) to make a potent imitation of strong beer. Soon after, beer approached legalization in parliament—a full turnout of the upper house of Iceland's Parliament voted 13 to 8 to permit the sales, ending prohibition on the island.
Following the end of prohibition, some Icelanders have celebrated Beer Day on March 1. Some people may take part in a "rúntur" (bar crawl), with a few bars staying open until 4:00 a.m. the next day. The legalization of beer remains a significant cultural event in Iceland as beer has become the most popular alcoholic beverage.