The Nigerian side sealed a much deserved victory in a game in which they controlled more of the ball.
After their loss of the same scoreline against Croatia in their opening Group D fixture, the Super Eagles of Nigeria made a formation switch in this game.
Striker Ahmed Musa scored a brace for the Super Eagles in a game which has kept their qualification hopes alive.
A fine pass from Victor Moses was finished off by Ahmed Musa in the 49th minute to put the Eagles ahead.
Musa then went on to score a brace as he rounded off the Iceland goalkeeper Hannes Halldorsson in the 75th minute, to score a memorable goal.
Iceland lost the chance to get half the deficit when Gylfi Sigurdsson blasted a penalty over the bar. The Eagles thus have destiny in their own hands when they play against Argentina next Tuesday.
Uzoho made a great save from Skulason a minute afterward as the Eagles preserved their two-goal lead. Odion Ighalo and Alex Iwobi came on for Iheanacho and Etebo in the last five minutes. Moses cleared the danger in the box in the second minute of added time.
Mikel Obi needed treatment on an injured left wrist in the third minute of added time as Nigeria held on for a thoroughly deserved win and three points to go second in Group D.