Iceland achieved sovereignty through the signing of a declaration with Denmark that marked a significant milestone in its quest for independence. Though Iceland had been part of the Danish realm since the late 14th century, the political climate following World War I granted Iceland an opportunity to renegotiate its status. As European nations reevaluated colonial and semi-colonial relationships during and after the war, Iceland capitalized on this transformative period. The declaration of January 1, 1918, stipulated that while Iceland would have its own constitution and government, it would still acknowledge the Danish crown as the sovereign ruler. Denmark maintained responsibility for foreign affairs and defense, marking a mix of independence and continued allegiance to Denmark.

This new status allowed Iceland the flexibility to manage its own domestic governance and laws while constructing a national identity distinct from Denmark. The establishment of the Icelandic Parliament, the Althing, paved the way for increased civil engagement and the strengthening of national pride. The period following this declaration saw a rise in cultural and political activity that further developed the Icelandic identity, leading to eventual full independence in 1944, when Iceland became a republic. The cooperation between the nations allowed Iceland to gradually reshape its international relationships while fostering local development.