Royals striker Jon Dadi Bodvarsson started in Iceland's penultimate warm-up friendly ahead of the start of the World Cup in Russia at the weekend.
But a goal from former Royals starlet Gylfi Sigurdsson on his return from injury could not prevent a 3-2 defeat against Norway.
Bodvarsson played more than an hour at the Laugardalsvöllur national stadium and looked good, getting in behind the Norway defence on a number of occasions, before being replaced by Sigurdsson with the game locked at 1-1.
Sigurdsson, who has been sidelined since March with a knee injury, then put the hosts 2-1 ahead - after Alfred Finnbogason's penalty cancelled out Bjorn Johnsen's opener.
But Norway, led by former Iceland coach Lars Lagerbäck, scored twice in the last ten minutes to win the pre-World Cup friendly courtesy of goals from two Premier League players - Bournemouth's Josh King and Crystal Palace's Alexander Sorloth.
Iceland now face Andy Yiadom's Ghana before their World Cup opener against Argentina on 16th June.