Residence Permit Application. To be able to stay longer than three months in Iceland, one has to apply for a limited residence permit to the Icelandic immigration authorities. On their web site one can see where to apply for visa to Iceland and also get the appropriate application forms.
Guidelines on how to fill out the residence permit application is here.
Visa application. When the residence permit application has been approved by the Iceland immigration at notification is sent to the embassy indicated in the residence permit application. The candidate must then apply for a D-visa at the identified embassy (most Danish embassy are allowed to issue the D-visa) and should contact the embassy identified in the residence permit application for further instruction on how to apply for the D-visa (usually involves sending the passport to the embassy).
ALL cost regarding the visa application will be reimbursed upon arrival in Iceland and submission of a proper receipts.
(important phone numbers, shopping, entertainment, travel, recreation, maps)