The fireworks blazed into the sky at the Laugardalsvollur stadium after the team coached by Heimir Hallgrimsson completed their expected victory over the European minnows Kosovo, ranked 184 by Federation Internationale de Football Association.
Ukraine was another three points behind Croatia in third, Turkey fourth, and Finland fifth. If the Icelandic team beats Kosovo today they have secured their ticket to the World Cup in Russian Federation. The team had previously lost out on qualification for the 2014 World Cup in Brazil as Iceland lost against Croatia in the qualification play-offs.
Martin O'Neill's men finished second in the group behind Serbia, who firmed up automatic qualification with a 1-0 win over Georgia after Aleksandar Prijovic's late goal.
Wales, needing just a draw to earn a playoff place, conceded a 57th goal to James McLean and attacked frantically but to no avail with injured Real Madrid star Gareth Bale watching helplessly from the stands.
Elsewhere, Spain finished their World Cup qualifying with a 1-0 win in Israel on Monday.
Ukraine manager Andriy Shevchenko has said that there are no fresh injury concerns, so he expected that the players will be stronger in today's match.
The spade work was done on Friday evening when Iceland recorded an impressive 3-0 victory in Turkey but goals from Everton midfielder Gylfi Sigurdsson and Johann Berg Gudmundsson of Burnley secured top spot in Group I.
Italy - already certain of a play-off place behind Spain - ended their campaign with a 1-0 over Albania in Shkoder, Antonio Candreva scoring in the 73rd minute. They will not be seeded in the playoffs draw, which takes place on Wednesday (NZT).
It was the tightest group in European qualifying. Kosovo completed its maiden qualifying for a major tournament with a single point.
Iceland players celebrate their 2nd goal.