Until 1874, Iceland was a dependency of Denmark rather than an independent nation. In 1874, Denmark granted Iceland home rule, which again was expanded in 1904. In 1918, The Act of Union, an agreement between Denmark, recognised Iceland as a fully sovereign state united with Denmark under a common king. Iceland established its own flag and asked that Denmark represent its foreign affairs and defense interests. Thus the United States Ambassador to Denmark conducted foreign relations between the United States and Iceland.
German occupation of Denmark on 9 April 1940, severed communications between Iceland and Denmark. As a result, on 10 April the Parliament of Iceland elected to take control of foreign affairs into its own hands.
Following a plebiscite, Iceland formally became an independent republic on 17 June 1944.