Polling stations opened as early as 9 am local time, with some differences expected in counties. Voting is set to continue until the evening, Anadolu Agency reported.
Nearly 400,000 Icelanders are set to vote on whether to restart accession negotiations with the EU, with preliminary results expected late Saturday night into early Sunday.
The referendum is not a vote on EU membership. A majority voting “Yes” would authorize the government to resume negotiations. Any eventual agreement, however, would be subject to a second referendum.
A Maskina poll published earlier this week put the "Yes" camp narrowly ahead at 51.3%, with 48.7% opposed. An earlier Gallup survey put both sides at 46%, with 8% undecided.
A separate survey cited by the European Policy Centre (EPC) found that 54% opposed joining the EU and 46% in favor.
Iceland applied for EU membership in 2009 after its banking system collapsed during the global financial crisis.
Negotiations began in 2010 but were suspended three years later after a Eurosceptic government took office. In 2015, Reykjavik informed Brussels that it no longer wished to be considered a candidate.
The European Commission maintains that Iceland's application remains legally valid and negotiations are merely on hold, according to an EPC report.